Influenza (the flu) is one of the most common, highly contagious viral infections. It’s something we’re all familiar with, but is your business prepared for when that influenza strain takes the form of something like H1N1?
Pandemics historically recur every 30 to 50 years, according to Lloyd’s. There’s reason to worry that the next one could be the worst yet. Increasing global networks and supply chains, rates of travel, and greater concentrations of the population living in cities all leave us more susceptible to infectious disease. The National Bureau of Economic Research estimates that a global pandemic event could have an impact of up to US$570bn – a staggering .7% of global income.
“This is definitely a top-ten risk cited by most chief risk officers,” said Bill Rossi, CEO of Metabiota, a biotechnology company that uses data and risk analytics to assess infectious disease threats.
Mitigation plans for infectious disease epidemics typically focus on the financial losses associated with direct costs, like treatment and response expenses, says a report compiled by Metabiota. The biggest share of costs related to epidemics, though, come from indirect impacts like reduced productivity. The World Health Organization estimates that indirect costs account for over 80% of the economic burden of epidemics.
A prime example of an indirect risk of epidemic is of course worker absenteeism. Current prediction methods used to estimate absenteeism rely primarily on public health metrics and self-reporting, but the team at Metabiota think that they’ve developed a tool to help risk managers better minimize the impact.
The statistical model works to predict absenteeism rates during pandemic episodes by using data from the US Centers for Disease Control and Prevention, US national surveys on worker absence, and industry-specific metrics. “I think we have what is probably the most comprehensive historical database of infectious diseases going back over one hundred years,” said Bill Rossi, CEO of Metabiota.
The data is used to run disease simulations and risk analytics for hundreds of thousands of scenarios. During the H1N1 outbreak in the US in 2009, Metabiota’s simulation projected a 4% rate of absenteeism during the peak epidemic period. When running for 1918 conditions, peak rates reached up to 27%, with the education and health sectors among the hardest hit.
With this information in hand, risk managers can more comprehensively prepare for and mitigate the indirect effects of infectious disease outbreak through three phases: education, mitigation, and insurance. “The educate phase is simply about educating [our clients] that this risk does exist, then we work closely with them on a consulting basis to help mitigate that risk,” said Rossi. “That could involve putting into place enterprise risk management plan for how to respond in the event of an outbreak.”
Quantification of the indirect costs of pandemics help insurers develop innovative products. “It’s a new area of risk that people are concerned about,” said Rossi, “and now with tools like we have from Metabiota that we can provide insurance companies, I think you’re going to see insurance products come to market now that will help mitigate against that risk.”
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