COVID-19 is affecting many people around the world in one way or another. The pandemic has put many parts of the world on “pause” and people are constantly scouring the news headlines for the latest numbers. The pandemic has also caused a strain on the workforce and there are implications for every industry.
Some of the professionals that are evaluating the situation are actuaries. An actuary is responsible for assessing and managing the risks of financial investments, insurance policies, and other ventures that pose potential risks. When it comes to the global pandemic and insurers, the goal of an actuary is to model various different aspects of the illness so that insurers know what to expect and how to shift policies.
As a member of the American Academy of Actuaries, a Fellow of the Society of Actuaries, and President of Vista Life & Casualty Reinsurance Company, Donald Solow of Madison, New Jersey, shares how actuaries are looking at COVID-19.
Impacts on Mortality
Unfortunately, Coronavirus has serious impacts on mortality. At the time of writing, there have been 34,705 deaths due to COVID-19 in the U.S. Compared to similar epidemics of the 21st century like SARS and MERS, the spread of Coronavirus appears to be much greater but with a lower mortality rate.
According to a report developed by the Society of Actuaries, the SARS pandemic had a case mortality rate of 9.6%, the MERS pandemic had a case mortality rate of 34.4%, and the case mortality rate of Coronavirus is currently 3.9%. Keep in mind that the figure for COVID-19 is subject to change as the pandemic continues.
Another important aspect that actuaries need to model is the rate of infection, notes Donald Solow. As previously noted, while the mortality rate of COVID-19 is generally lower than other epidemics like SARS or MERS, the spread rate is higher. For the past few weeks, we are all familiar with the term “social distancing,” as it is estimated that droplets from infected persons, which cause the spread of COVID-19, can travel up to six feet. Without effective containment, it is currently estimated that one person can infect between two and four others.
When compared to other illnesses as well, the incubation period for COVID-19 is fairly long, with a timeline ranging from anywhere between two and 14 days from the time of transmission to the time that the infected person starts showing symptoms.
It is also important to note that the overall spread of transmission will vary greatly depending on different locations. In the U.S., there are different measures for virtually every state. Some states are under stay-at-home orders while others are seeing their estimated “peaks” in cases. U.S. President Donald Trump recently announced a plan to get the states that have been affected the least back to work to improve the U.S. economy. With these implications, it is not known what the projected spread could be when these measures are introduced.
Health Care Costs and Underlying Causes
Another important projection for insurers to be aware of is the cost of health care, says Donald Solow. According to experts that were surveyed, the peak months for hospitalizations for COVID-19 in the U.S. are April and May, with June and the following months trending downward. As of April 17, cases of Coronavirus that required hospitalization stand at 109,426, according to John Hopkins University. At the beginning of the outbreak, it was reported from various sources that COVID-19 tests, as well as medical equipment like masks, ventilators, and respirators in the U.S., will not be able to meet the required demand for the pandemic.
When it comes to demographics, it is also important to look at the ages of people infected as well as the number of people with underlying health conditions that may be infected. According to statistics involving fatality rates by specific patient characteristics in China, patients with cardiovascular disease, diabetes, chronic respiratory disease, hypertension, and cancer were among the highest rates of mortality in terms of underlying conditions.
Donald Solow on Overall Impacts for Actuaries
While actuaries can do their best to model projections and implications for insurers based on the information they have, it is important to realize that this data may not be entirely accurate, states Donald Solow. The reported numbers of COVID-19 cases and deaths are only based on the number of people that have been tested for COVID-19. The numbers do not reflect those that may have the illness but have not gotten tested.
While it is possible for actuaries to assess the risk based on the numbers they have at their disposal, at this time it is difficult to create an entirely accurate projection as the pandemic is currently ongoing. Any models presented are estimates at best. Hopefully by mid-2020, the world will have a more accurate reading of the pandemic as a whole.
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