Insurers say they are prepared for the pandemic

By Donna Glasgow | November 26 2009 06:38PM

Canadian life insurers are prepared to deal with the H1N1 flu pandemic whether from the standpoint of business continuity or the potential for increased claims, say industry stakeholders interviewed in early November.

Irene Klatt, Vice President, Health Insurance with the Canadian Life and Health Insurers Association (CLHIA), says the industry's "level of preparedness is very good. We've been proactive."

As of early November, the H1N1 virus had caused limited societal disruption, but Ms. Klatt said, during an interview with The Insurance Journal, that the CLHIA is monitoring the situation closely.

On Oct. 15, the CLHIA hosted a session for insurers on pandemic preparedness that included a speaker from federal regulator, the Office of the Superintendent of Financial Institutions (OSFI) as well as public health representatives. The OSFI speaker addressed business continuity and solvency issues, explained Ms. Klatt, whereas the public health workers spoke of prevention strategies and the country-wide vaccination campaign.

She explained that the business continuity aspect of pandemic planning is aimed at ensuring that insurance companies' business activities, in particular claims handling, is carried out as usual even if a large number of employees fall ill.

Part of business continuity planning involves cross-training employees so that they can cover off sick colleagues and keep operations running, she says.

Work-at-home strategies may also be part of a business continuity strategy, adds Ms. Klatt. "You may be perfectly healthy, but there might be someone else at home who is not that you have to stay home with. Could you still do your work (or some of it) at home by computer?"

Debra De Bock, Vice President of Risk Management for Empire Life, says her company has had a pandemic plan in place for some time. "Our primary concern is to be always in a state of readiness."

As of Nov. 6, when interviewed by The Insurance Journal about the insurer's business continuity strategies, Ms. De Bock said that Empire Life had not yet formally invoked its pandemic plan for H1N1, but was "maintaining a state of awareness." This involves monitoring employee absences at the Kingston head office and across Canada. At interview time, the company had noted "the odd person off" with the flu or to care for a family member, but overall, the insurer had not seen a noticeable increase in absences.

Also at the time of interview, Empire Life had not had any death or disability claims related to H1N1, however, it had seen a surge in prescriptions for Tamiflu, an antiviral medication often used to treat influenza. As of early November, Empire Life had 2010 Tamiflu prescriptions filled for the year to date by employee benefits plan members, compared to 529 prescriptions during the same period last year.

What if the H1N1 situation turns into a worse scenario with high claims and widespread staff absences? Ms. De Bock says her company tries not to do specific worst case scenarios, although its general pandemic plan does anticipate a situation in which there would be increased claims.

She explains that OSFI prescribes that federally regulated financial institutions include, as part of their stress testing, the impact on a company's capital in the event of a pandemic. "The goal is to ensure that companies can meet all their obligations. We're confident that we're well positioned for this," says Ms. De Bock.

Contacted by The Insurance Journal, Rod Giles, a spokesperson for OSFI, says that the regulator has not issued any guidelines for H1N1 in particular, although "just as we took action several years ago in light of the potential for an avian flu pandemic, we are continuing our practice of asking institutions to review, test and update their business continuity plans on an ongoing basis, including the adequacy of those plans for dealing with a potential flu pandemic." 

Ms. De Bock says that in a scenario where a pandemic could lead to significant levels of employee absences, Empire Life's pandemic preparedness plan include strategies to ensure that it is staffed adequately to meet customers' needs.

Teresa Muzzi, Director of Media and Public Relations for Sun Life Financial, says this is also a focus for her company. Sun Life has a cross-training program, especially for front line employees, such as call centre workers. Cross training is aimed at ensuring business as usual for customers, but it is also intended to ensure that when an employee returns to work, they don't find piled up work to complete, she explains.

Prevention efforts

Preventing the spread of H1N1 among employees is another key strategy for Sun Life at present, says Ms. Muzzi. In addition to providing up-to-date information on where and when employees can obtain vaccinations, the company is strongly encouraging sick employees to stay home. It has distributed bottles of hand sanitizers to employees and sanitary wipes for desks and keyboards. Hand sanitizer dispensers have also been installed for people entering the building.

With operations in many of regions of Canada and several regions of the world, the company's continuity plans in a pandemic could include compensating for shortages in one region with staff from other unaffected regions. Presently Sun Life is operating under normal business conditions worldwide, but is monitoring the current situation and is capable of implementing parts of its plan quickly if required.

With respect to solvency, Ms. Muzzi says, "We have tested a range of pandemic scenarios and have determined that under these scenarios the company's strong capital and surplus levels could withstand the estimated claims and other losses, and continue to have sufficient capital to manage the business going forward."

Client concerns

Asked whether clients had raised concerns about H1N1, Ms. De Bock of Empire Life said some employee benefits sponsors had asked questions last spring about Empire Life's preparedness as part of their own pandemic planning processes.

She said she hasn't really had any questions from advisors who might be dealing with concerned clients, but she offered this advice: "Our main message, internally or externally, is that the most critical thing is to stay informed, stay calm and communicate."

Impact on underwriting

If an advisor has a client seeking insurance during a bout of H1N1, there could be implications.

Helene Michaud, Assistant Vice President, Marketing of reinsurer Munich Re says that in terms of underwriting, "if an applicant has an active H1N1 infection, the application will be postponed for 3 months. However, if the applicant has had H1N1 but has fully recovered with no complications as confirmed by a physician, the applicant will be considered a standard risk, provided the risk is otherwise assessed at standard."

 SARS experience provided lessons for industry

Irene Klatt, Vice President, Health Insurance with the Canadian Life and Health Insurers Association (CLHIA), says the CLHIA and its insurer members have been working hard on preparing for a pandemic for the past few years. In doing so, the industry has applied the knowledge it gained during the SARS (Severe Acute Respiratory Syndrome) crisis that hit Toronto in 2003, she adds.

Living and working in Toronto during that period, she says that one of the lessons learned from SARS was the need for the CLHIA to be connected to health authorities and other government departments during a crisis to provide the industry with critical information and facilitate decision making.

"During SARS it was very difficult to connect with anyone," she says.

By contrast, the CLHIA is now interconnected with the Public Health Agency of Canada and the Department of Finance and receives updates and exchanges information on the H1N1 situation through daily conference calls with representatives of other sectors that the government considers to play a critical role in society. "We, as part of the financial sector, fit in as part of the critical infrastructure."

This kind of information flow is important during a crisis since critical decisions often have to be made quickly. Ms. Klatt recalls, for instance, that during the SARS outbreak, sick individuals were told to stay in quarantine for 10 days. During this situation, it came to light that short-term disability coverage excluded quarantine. Since two weeks is a long time to go without pay, the concern was that people might return to work too early. Together, insurers decided that good public health policy required this coverage limitation to be changed. "Within two or three days we, as an industry, decided to pay for quarantine. During SARS, we demonstrated our responsiveness."