RIAAN VAN REENEN: Another pandemic is probable, so keep your insurance policies

The Sars-CoV-2 virus is likely to become something we are going to need to live with for the foreseeable future. That we are unlikely to completely stamp out the virus in the near term is due in large part to how very contagious it is. This means that to eradicate the virus, we mathematically estimate that in the region of 90% of the world’s population would need to be protected against it at any point in time through a combination of vaccinations and naturally acquired immunity.

Part of the challenge here is the risk of the efficacy of immunity and vaccinations waning over time. This, alongside the increasingly globalised nature of humanity, means there will probably remain a portion of the world’s population that is susceptible to the virus and the disease it causes. History has taught us this. Looking back in time, humanity has only been able to completely eradicate one disease, that being smallpox. It would be a phenomenal but unlikely achievement to add Covid-19 as the second disease on this list.

Fortunately, as long as we can keep vaccination rates at a high level, the proportion of the population that is likely to be affected by the virus at any time could considerably reduce, and the disease could be well managed without overburdening healthcare infrastructure. It is also encouraging to see potentially effective medications emerging to treat acute Covid-19. Drugs from both Merck and Pfizer are already showing incredible potential.

In short, the prevailing scientific consensus is that we can expect to move from a global pandemic to a situation where the Sars-CoV-2 virus and the Covid-19 disease that it causes becomes endemic. While still in some ways burdensome, it can be well managed across most regions of the world, including SA. 

The immediate implication of this is twofold: we envision that continued vaccinations (or booster shots) could become necessary for a longer period, much like with the seasonal flu, and that we have a new health and mortality risk factor for the foreseeable future. This being the case, there are some key factors to keep in mind as we progress towards the “new normal”.  The investments that have been made in vaccinations over the past 18 months, and the rate of medical advancement, has been unlike anything the world has ever seen. This bodes  well for the treatment of many current and future diseases. 

Nevertheless, the Sars-CoV-2 virus has demonstrated to the world that the risk of the next unknowable pandemic is probable, and that this risk will likely increase — and potentially at a faster rate than ever before. 

With the evolution of both present and future health risks, keeping your life insurance policy, especially if it provides a comprehensive set of benefits such as income continuity in the event of illness, has become more important than it ever used to be. The cost of protection cover is likely to increase following the greater risk and uncertainty highlighted by the pandemic. Premium guarantees embedded in a life insurance product have also become more relevant and valuable. 

We’ve seen a recognition of the higher value provided by life insurance among our clients. Lapse rates on life insurance policies are at their lowest levels ever, despite the increased financial strain in the economy due to the pandemic.  Health and wellness has also become more important than ever before.  Discovery Life and Vitality data, as well as a large body of international evidence, shows a clear relationship between health and wellness and a reduced likelihood of experiencing severe, or deadly, symptoms after contracting Covid-19. 

The perception that Covid-19 only has a severe effect in older individuals has been shown to be a fallacy.  In fact, the disease can significantly affect people of all ages, but the relative risk to the life insurance industry is actually higher for those aged between 40 years and 50 years than for older age demographics.

Finally, the use of technology is making it far easier to do business in more efficient ways. This is a game-changer for the industry and has also become increasingly important for clients and advisers alike, by ensuring appropriate access to the right cover, when it's needed the most. 

• Van Reenen, an actuary, is CEO of Discovery Life.