Question

Would it be possible for private insurers to offer a form of private insurance that offers to pay loss of use/business interruption coverage to business organizations for their loss of income and continuing expenses for such future pandemic incidents. Your paper would have to discuss the characteristics of a pandemic and the appropriateness of such an event as an insurable loss for private insurers.

Answer 1

Answer: not possible

Required characteristics are as below:

No.1) this must be the new disease.

No.2) this must spread worldwide – most of the countries would be affected.

No.3) since the disease is new, there must not be any vaccine or specific medicine.

No.4) it will remain for certain periods – like for few months or years.

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Insurers are those who are taking the risk for loss of an insured. Such loss may be the loss of business, loss of profit, loss of market, and loss of any sort of other interruption. These loses are so many in numbers (may be uncountable), one particular insurance policy can’t cover all those. Therefore, such insurance is not possible.

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Each insurance policy must have a policy value, which is required for identifying insurance premium. This is not possible in case of pandemic, since the loss is uncertain and can’t be measured in monetary term in advance. The world can see the amount of loss once it happens.

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Time factor is crucial in case of any insurance – there must a definite period. This creates problem in pandemic insurance, because nobody knows how long it will continue (Spanish flue stayed for almost 3 years). An insurance policy can’t carry such uncertainty; therefore, it is not possible.