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The long term impact of pandemic on health and insurance outcomes remains unclear

30 September 2020 Gareth Stokes

Life insurers and reinsurers are shifting their focus from the direct short term consequences of the COVID-19 pandemic, to consider its longer term impact on their morbidity and mortality experiences. They have realised that the direct and observable impact of pandemic – as measured by the number of deaths, hospital admissions, positive infections, and recoveries to date – only represents the ‘tip of the iceberg’ insofar the disease’s overall financial and healthcare footprint. Liberty discussed the impact of COVID-19 on the South African economy, its citizens, and life insurers during a ‘no holds barred’ presentation of their specially-commissioned COVID-19 Future Trends Report

Wave upon wave of coronavirus

The report findings were presented under four pillars, namely: The first wave: Direct short-run health effects; The second wave: Indirect short-run health effects; The third wave: Direct mid-run health effects; and The fourth wave: Indirect long-run health effects. 

We favour the use of phrases like ‘first wave’ and ‘second wave’ as apt descriptors for humankind’s battle against the COVID-19 pandemic. They conjure up vivid images of a global citizenry locked down in their homes while wave after wave of coronavirus ebbs and flows around them. As mentioned in the introductory paragraph, we already have a fair understanding of what the first wave entailed, based on data received from the more than 20 million infections and 750,000-plus deaths to date, mid-August 2020. 

The first wave singled out comorbidities such as cardiovascular disease, chronic obstructive pulmonary disease, diabetes, hypertension, and obesity as good indicators of a more serious COVID-19 infection. “This is worrying form a South African perspective where we have a high prevalence of both diabetes and obesity, placing a high proportion of the population at risk of complications from the disease,” said Bronwyn Williams, a finance specialist for Flux Trends, who presented the report findings. There is also a high correlation between certain demographic groupings and the risk of COVID-19 complications. Those who are older are at greater risk; men typically fare worse than women; and the poor suffer more than the wealthy. 

Etienne Rossouw, Head: Life Product and Pricing at Munich Re of Africa was on hand to interpret aspects of the COVID-19 Future Trends Report from a reinsurance perspective. He said that the weekly excess deaths published by the South African Medical Research Council (SAMRC) were a good indicator of the mortality impact of the so-called first wave. “Mortality is not seen as the highest risk to life insurers,” he said. “We believe it represents medium additional risk, especially for big blocks of insurance business where people are fully underwritten and are generally younger, with fewer comorbidities, than the general population”. 

Mental wellness issues pose challenges

The second wave, described as indirect short-run health effects, focused on the impact of the first 120 days of pandemic and consequent national lockdown on mental wellness. Anecdotal evidence points to a citizenry that is under significant pressure and at risk of burnout, depression, loneliness, stress, and suicide, to name a few. Mental wellness issues are compounded by factors such as lockdown-induced job losses and the pressures associated with the new normal of working from home. 

The third wave considers the direct mid-run health effects experienced by those who have recovered from the COVID-19 infection. “Those who have recovered [are often] stuck with severe lingering effects that affect multiple organ systems including the heart, immune system, kidneys, lungs, and urogenital tract,” observed Williams. There is a growing acceptance among medical specialists that many of those who survive the infection will have long term health issues to deal with. This has serious implications for life insurers who continue underwriting using pre-COVID rating factors. 

Lisa Gibbon, Divisional Executive of Onboarding at Liberty observed that insurers would have to consider whether or not a potential insured had been positively diagnosed with COVID-19 in addition to their experience with the disease. “Many will get the virus without long term effects and their applications for life cover will not be affected,” she said. “We will, however, have to assess every potential client who has had the virus on the details of their health history, their current health, and their health symptoms”. This approach is similar to that taken when providing death, disability, and severe illness to clients who suffer from other diseases such as diabetes. The cover offered in such cases varies from one insurer to the next, in line with how well the applicant manages his or her illness. 

Deferred surgeries and late diagnoses

The fourth wave illustrates why it is so difficult for insurers to accurately estimate the impact of pandemic on their claims experience. They are not only dealing with claims that are associated with the disease; but with potential claims due to the indirect long-run health effects caused by the pandemic. “We are talking about people who will suffer compromised health outcomes without ever having contracted the disease,” said Williams. Among the consequences of lockdown is that many individuals delayed or missed check-ups; deferred surgeries; or skipped treatments. It is estimated, for example, that South Africa saw around 12,000 deferred surgeries each week during lockdown level five and four. 

“We have statistics from California that show a huge reduction in people presenting at hospital emergency wards for heart attack,” said Rossouw. “People are not suffering fewer attacks; but just not going to the emergency room to get treated”. Of equal concern is that cancer statistics from the Netherlands show a 60% reduction in skin cancer diagnoses and a 25% reduction in all other cancer diagnoses in the second quarter of 2020. These illnesses will eventually be diagnosed, with the additional risk introduced by the fact that they are picked up at later stages of disease. 

David Jewell, Executive for Risk Solutions at Liberty closed the presentation with some upbeat views. He said that South Africa, based on weekly excess deaths published by the SAMRC, had shown a sharp improvement in the two weeks prior our move to lockdown level two. “There is still a great deal of uncertainty concerning the long term health consequences of the virus,” concluded Jewell. “We believe this presents insurers with an opportunity to live out our purpose, fulfil our promise to clients by paying claims as quickly as possible,  and being there for clients in their moment of greatest human vulnerability”.

Writer’s thoughts:
It is difficult to find positives when everything is wall-to-wall COVID-19. What is apparent, following our umpteenth pandemic-related insurance presentation, is that the life insurance sector is capable of absorbing the claims impact of pandemic on its death, disability, and severe illness benefits. Have you had any issues with pandemic-related death, disability, or severe illness claim pay outs between March and August 2020? And have you encountered any underwriting difficulties placing new life policies for clients that have tested positive for COVID-19? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].


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