July 28, 2008
 By Bruce Cameron
Researchers have reached some startling conclusions of what might happen if a pandemic similar to the Spanish flu outbreak of 1918 swept the world.
The 1918 Spanish flu pandemic, which wiped out somewhere between 50 million and 100 million people, has been virtually obliterated from the public’s memory, despite the fact that it claimed more lives than the four years of World War 1. At its peak the Spanish flu pandemic killed more people in 24 days than HIV/Aids has killed in 25 years.
And there is concern worldwide that a pandemic of similar proportions could strike at any time.
South African pandemic researchers Andre Dreyer, Grete Kritzinger and Jethro de Decker – all of RGA Reinsurance – warn that if it does, the next pandemic could very well affect you in many ways you may not expect.
In a paper delivered at the International Actuarial Association’s health colloquium in Cape Town last year, Dreyer, Kritzinger and De Decker addressed the effects of another pandemic sweeping the globe. Although they looked mainly at the ability of the life assurance industry to withstand the impact of such a pandemic, the researchers also considered how individuals would be affected.
In the gloomy scenario they paint, even if you do not fall ill yourself, you can expect to take a battering in many other ways.
One thing of which the researchers do seem sure is that if you fall victim to a pandemic, your life assurance should pay out. And they predict that the life assurance industry could be even better off after a devastating pandemic. The reasons are:
The death rate could fall after the pandemic because the fittest would have survived; and
After the Spanish flu pandemic, a flood of people signed up for life assurance. Other research has suggested that currently South Africans are dramatically under-insured against both death and disability.
The above predictions do not negate the fact that the life assurance industry will be hard-pressed while the pandemic is under way.
In what the researchers call a "central scenario", or a severe pandemic similar in nature to the Spanish flu pandemic, an additional 20 people for every 1 000 of the population covered for funeral assurance will die; an additional 14 people for every 1 000 of the population covered by group life assurance (attached to your retirement fund membership) will die; and an additional eight people for every 1 000 of the population covered by individual life assurance will die.
This death toll will cost the life assurance industry R37.6 billion.
A countering factor for the life assurance industry, however, is that many elderly people who receive a guaranteed pension from the life industry are also expected to die. This would mean that the industry would no longer have to pay their pensions and would take control of the money that was invested to purchase the pensions.
A mild pandemic similar to that caused by Asian flu in 1957 would have an excess mortality rate (above the normal death rate) of about two percent of that of the "central scenario" and would cost the life assurance industry about R753 million. A moderate pandemic similar to the Hong Kong flu outbreak in 1967 would have an excess mortality rate of seven percent of that of the "central scenario" and would cost the life industry about R2.7 billion.
An ultra-severe pandemic that would have worldwide fatality rates similar to those caused by the epidemic of severe acute respiratory syndrome in 2003 – in which 9.6 percent of people who contracted the disease died – would have an excess mortality rate of about five times greater than that of the "central scenario". It would cost the life industry R188 billion, which would place a severe strain on the survival of the industry and its ability to meet all claims.
A battering you will take, ill or well, in the event of a Spanish flu-type pandemic. The most severe impact will be a worldwide recession.
Millions of people would be too ill to work, many would never return to work and even those who are well would stay away from work, either to nurse the ill or to avoid infection, the researchers say.
Hospitals would be over-loaded and would be unable to cope with the surge in demand, while the hospitals themselves would be under pressure because their staff would also be ill.
A massive work stayaway would spark a worldwide recession as essential services ground to a halt, consumer demand dried up and company profits fell. Many businesses would have to close temporarily, with the result that you might not receive a pay cheque. Widespread power failures might result in prolonged periods without internet access, telephone services or even access to ATMs to allow you to conduct your personal finances.
It has been estimated that the short-lived outbreak of severe acute respiratory syndrome cost US$40 billion as a result of the impact on consumer spending, consumer confidence and investment.
The researchers say South Africa was one of the countries to be worst-hit by Spanish flu in 1918 and another, similar pandemic is likely to be just as devastating. The reason is that South Africa has a highly sophisticated infrastructural network, which helps a pandemic to spread rapidly, but it is also relatively poor and lacks a sound universal healthcare service.
They do not believe sufficient planning has been done to enable the country to cope with even a mild epidemic. Although neither the life assurance industry nor the country in general are doing well in planning and preparing for a pandemic of short but severe duration, they believe the capacity exists to do this.
Pandemics, they say, are nothing new and have been recorded as occurring every 30 to 40 years.
"Influenza pandemics have been most noteworthy in the 20th century … Experts believe that the next pandemic will again be some form of influenza pandemic, with the current threat of avian influenza touted as a possible forerunner of the next big killer," the researchers conclude.
This article was first published in Personal Finance magazine, 1st Quarter 2008.See what’s in our latest issue
  
 
|
© 1999 - 2010 Personal Finance & Independent Online (Pty) Ltd. All rights reserved.