Insurers advised to insure against contagions, not pandemics

Insurers need to consider insuring against a contagion, rather than a pandemic, Barrett Hubbard, managing director of MINT Canadian Specialty, told attendants of the Insurance Institute Ontario Chartered Insurance Professionals Societys Symposium 2007.
A pandemic is an epidemic that is geographically widespread; occurring throughout a region or the world, Hubbard explained, whereas a contagion is the specific virus, or trigger, such as salmonella, H5N1, or MRSA.
While researchers warn us that a pandemic is inevitable, events that are inevitable are not easily insurable, he continued, adding that it is impossible for an insurer to cover an entire economy in the event of a pandemic.
But research also indicates that contagious events are on the rise with 12 cases of the Bubonic Plague in the U.S. in 2006, a mumps outbreak in several mid-west States in April of last year, and the Toronto SARS outbreak of 2003, to name a few, with globalization only increasing the contagion risk.
With this in mind, insurers need to identify how to insure against the fortuitous effects of contagions on a business and control the expectations of the client through careful explanations.
An insurance product, Outbreak Extra Expense, is currently available, he noted, that can protect a business against the random effects of closure due to contagion.
Businesses should invest but use care not to over invest in how they will respond to not just a pandemic event but any contagion, Hubbard advised.
Brokers have a duty to educate themselves about contagion risk and as part of a well-developed risk management program give their clients an opportunity to view insurance alternatives, he stressed.