Second only to the questions we have been receiving about business interruption insurance lately are from people wondering if pandemic insurance exists or is a possibility for the future. It’s a very fair question to ask, given that thousands of Alberta businesses have been completely out of operation for close to two months now, losing revenue and leaving staff without income. Insurance that would provide for losses incurred from business closure and cover employees’ wages seems like a very good idea right now.
Are There Existing Pandemic Insurance Policies?
Some forms of pandemic insurance exist already, says a recent article from CNN Business, although not in Canada. A U.S. brokerage named Marsh developed a product called PathogenRX in 2018 to provide financial protection to companies affected by an infectious disease outbreak. At the time there wasn’t much uptake, as policies were costly given the perceived risk. But, a lot of things have changed recently, including that impression. The article continues on to say that the data obtained from the COVID-19 pandemic could possibly provide insurance companies with the information they need to design the appropriate policies in response.
Would Pandemic Insurance Be Expensive?
ATB Economics’ daily newsletter The Owl recently presented a comparison of business revenue in Alberta from January through March of this year as compared to last. Three out of 10 businesses informed a survey that they had experienced a loss of 50% or more, and more than three-quarters of the respondents said their revenue was down somewhat. On March 25, the Calgary Herald reported that the average cost to businesses was already at $136,000 nationwide. Multiply that by 2.5 and you reach an average of $340,000 at this point. Just those numbers means that pandemic insurance policies would have to be worth several million dollars for most. To further the point, the CNN article tells of a hospitality company, potentially a hotel chain or something of the like, that has been shopping around for a pandemic insurance policy worth hundreds of millions of dollars.
As insurance companies are risk-averse as a rule, an easy prediction to make is that they would consider the next pandemic not only a possibility, but an eventuality, and would also plan for it to be even worse. And that’s something author Richard Preston told CNBC he believes, as well. An expert on outbreaks, Preston says that unless we suddenly stop travelling by air and congregating in urban areas, the next pandemic is virtually inevitable. The CNN article suggests that we can expect severe coronavirus outbreaks every 25 to 50 years, with smaller outbreaks occurring more frequently. In fact, even before COVID-19 there were from 100 to 150 outbreaks of various diseases (cholera, malaria, ebola, etc.) happening simultaneously around the world every single day.
All of this would lead one to believe that should pandemic insurance be developed, it would likely be quite expensive unless, of course, a number of businesses purchase it. In fact, some are of the opinion that pandemic insurance is actually a bad idea, such as CanadianUnderwriter.ca, who say that it would more than likely cause the financial ruin of any company that tried it should another pandemic occur.
It is estimated that pandemic insurance claims could cost American insurers from between $200 billion and $400 billions per month. In fact, it could even tank the industry. If only 10,000 Alberta businesses (not even close to the total number of businesses suffering right now) were to file a claim for just $500,000 it would result in $5 billion worth of claims. That itself is cause to pause, but pandemic insurance underwriters will also need to figure out how to work around millions of claims being filed all at the same time to every single provider in order to ensure their industry can manage that sort of impact. That’s where some believe the use of financial markets could come into play.
Lane’s Insurance Covers all Alberta Businesses
If you are a business owner in Alberta, remember that there are additional supports available, including requesting insurance payment deferrals, deferred property tax payments, and deferred utility bill payments.
The expert brokers at Lane’s Insurance are standing by to help you with all your business insurance coverage needs, including:
- Business interruption insurance
- Contract surety bonds and commercial surety bonds
- Contractors’ insurance
- Oil and gas insurance
- …and much more
As a brokerage, Lane’s Insurance works for you, not for the insurance providers. You’ll get impartial advice that protects your best interests, along with the most competitive rates on the market. Get started today by contacting a Lane’s Insurance representative.
