Risk managers and their insurers could face big losses if they fail to prepare properly for a possible flu pandemic, medical and risk management experts warn.
While the current concern is focused on the avian flu strain--clinically referred to as H5N1--the world is not prepared for a severe outbreak of the flu, according to Dr. Myles Druckman with International SOS, a medical risk management solution provider, during a recent webinar sponsored by Chicago-based insurance broker Aon on "Influenza: Exploding The Myths."
Those who had firsthand experience with the 2003 outbreak of SARS (Severe Acute Respiratory Syndrome) in Asia--when flights were quarantined and travel to infected areas was stopped--are better prepared for the fallout of flu, according to Dr. Druckman. Firms that had to adapt to that crisis have been making plans for a flu pandemic, but most of the rest of the world has not, he contends.
The danger from the avian flu is limited, with very rare reports of human-to-human contact, speakers at the webinar noted. However, the mortality rate should such an outbreak occur is significant--60 percent of those infected die--and when it does reach a stage where there is human-to-human contact it will "herald the pandemic influenza," said Dr. Druckman.
It will also mean a prolonged crisis that could last from six-to-18 months, he warned.
Risk managers need to plan now about how to keep their critical operations running when their workforce is severely depleted by any such illness, advised Dr. Gisele Norris, associate director of Aon's health care alternative risk practice.
"A pandemic will occur, but no one can say how severe it will be," said Dr. Norris. "By conducting exercises that show you how the impact of a pandemic may affect your business, you'll be able to look at various responses and critically assess which are the most valuable to your operation, or ...how much are you prepared to lose."
A midlevel infection of influenza, she said, could mean between 89,000 and 207,000 deaths in the United States alone, and economic disruption amounting between $71 billion and $166.5 billion--in addition to the millions of people who will fall ill.
Battling the disease will mean many people isolating themselves either out of illness or fear of getting sick, or the need to take care of loved ones who have fallen ill. This in turn will mean workforce disruptions, which could spell supply chain disruptions as manufacturers do not have the people to do the work, the speakers warned.
One strategy, Dr. Norris said, calls for designing supply plans that will rely on second- and third-tier vendors to keep an operation going. There will also be effects on sales as demand is stifled due to illness, the speakers noted.
Businesses will need to explore insurance programs that will shift financial risk, but Dr. Norris noted there are few available to deal directly with the fallout from avian flu.
Steve Pearce, director of crisis management and business continuity for Aon Corp., emphasized that the most important loss control step for any business to take is to develop a continuity strategy to deal with the ramifications of a pandemic.
He said little help can be expected from government in this area, as public officials will be primarily concerned with caring for sick individuals.
"We are on our own," he said, referring to businesses.
Leadership in this crisis will be key, he continued, and people will need to have trust in business leaders that they have a plan in place to deal with such a crisis.
"A pandemic is inevitable," he said. "How bad it will be is the question."
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