Insurance Industry Ready, Even for Ebola

Posted on Monday, June 17, 2019

Ebola, the highly contagious hemorrhagic fever virus dominating news headlines, has been a hot household topic of conversation and concern. Currently centered in Sierra Leone and Liberia, the virus has long been identified as a potential worldwide threat. While there have not yet been major outbreaks outside of West Africa, many consumers have been wondering how insurance companies would withstand the possibility of the Ebola virus developing into a worldwide pandemic.

The current Ebola threat is tragic, but it is not currently a significant threat to insurance company stability. Most analysts considering "worst case scenario" projections believe that the insurance industry has more than enough liquidity and stability to handle any potential threat, and still keep its promises to American consumers.

The most recent statistics:

According to data from the World Health Organization, the Ebola virus has infected just over 15,900 people as of mid-November, 2014. The disease has been fatal for around 5,700 of those victims, nearly all in West Africa.
The majority of the victims of this virus, except for a small number of cases in Nigeria, have been in Guinea, Sierra Leone and Liberia. In addition, there have been four cases diagnosed in the United States, one in Senegal, several in Mali, and one in Spain.

What's the Worst Case?

The primary concern for epidemiologists is an individual traveling from an infected area to a densely populated area, such as China or India. In these urban areas, people live in much closer contact where viruses can spread rapidly, easily overwhelming a limited health care system (as occurred earlier this year in Africa.) However, at this moment, there is minimal concern of any widespread outbreak within the United States.

Life Insurance Industry Effects

Currently, the overwhelming majority of Ebola cases and those at immediate risk of infection, by being in a direct path, are in West Africa. Though the significant human loss would remain considerable and tragic, life insurance is not common in these African countries. Consequently, their deaths would not financially affect the life insurance industry or reinsurance pools in the western world. Even if the infection spread to hundreds of thousands of Africans, it would still not affect life insurance premiums in the United States, nor materially affect the financial stability of these companies.

Since life insurers currently pay around 2 million claims each year in the U.S. alone, even if the virus affected tens of thousands of Americans, the net effect on life insurance pools would likely be minimal - and certainly within the range of possible events that life insurance companies routinely plan for.

Health Insurance Industry Effects

The costs of decontamination facilities, protective equipment, and other outlays, in addition to the costs of isolation and such factors as having to convert two patient/room wards to single occupancy rooms, would be considerable. Obviously, the caregiving aspect of each Ebola case would be extremely expensive in terms of staffing and logistics.

Workers' Compensation

Since health care workers are a recognized high-risk group, each worker who contracted Ebola would likely file a Workers' Compensation claim. Consequently, this would cause a rise in the number of Workers' Compensation claims, and potentially increase premiums employers pay to cover health workers.

Property and Casualty Lines

One area that could possibly feel some spillover is in property and casualty/liability insurance. For example, a substantial increase in claims involving negligence against companies failing to implement proper infection-prevention steps could force general liability lines to increase premiums somewhat. We could see effects in lines like medical malpractice, and directors and officers' liability insurance. It's too early to tell how substantial this effect could be on underwriting and premium levels. However, primary insurance carriers generally contract with reinsurers, in making sure to cover any risks beyond the capacity of the primary carrier. Ultimately, even the increased perceived risk in these lines should ultimately be easily absorbed by the capital markets - which is, of course, the intended function of the insurance industry.

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.