Concerns Over Economic Damage from COVID-19: "Infectious Disease Insurance Should Be Discussed Proactively"

[Asia Economy Reporter Oh Hyung-gil] As the novel coronavirus disease (COVID-19) spreads and economic damage caused by infectious diseases increases, there is a call for proactive discussions on insurance products addressing infectious disease risks.

On the 16th, Song Yoon-ah, a research fellow at the Korea Insurance Research Institute, stated in the report "The Need to Develop Insurance Products for Infectious Disease Risks" that "the scale of economic losses caused by infectious diseases is comparable to that of climate change."

Researcher Song analyzed, "The frequency of infectious disease outbreaks and the economic sensitivity to infectious disease risks are increasing," adding, "The negative impact of infectious disease spread on the economy includes human losses due to infection, treatment and quarantine, and death, as well as economic losses caused by reduced economic activity from anxiety among economic agents and failures in global supply chains."

According to the Global Preparedness Monitoring Board (GPMB) under the World Health Organization, if an infection similar to the 1918 Spanish flu?which killed 50 million people, 2.8% of the world population at the time?were to occur now, 80 million people would die and the global GDP would decrease by 5%.

Researcher Song pointed out, "More than 700,000 people worldwide die annually from infectious diseases, and the scale of losses caused by infectious diseases is estimated to account for 0.7% of the global gross domestic product (GDP), or 570 billion dollars. South Korea has also experienced increasing economic damage due to infectious diseases such as the 2009 novel influenza, the 2015 MERS (Middle East Respiratory Syndrome), and COVID-19."

He continued, "Infectious disease risk is a tail risk with low probability but large loss magnitude when an incident occurs, and because it is difficult to calculate the damage amount, private insurance generally hesitates to provide coverage. Insurance companies face challenges in quantifying the indirect ripple effects such as consumption slowdown and corporate profit decline caused by the spread of anxiety among economic agents during infectious disease outbreaks."

However, "Overseas modeling companies are attempting to predict the likelihood and impact of infectious disease risks using variables such as national-level quarantine measures, population density, population movement, and transportation patterns," and "there are discussions on developing epidemic index-type insurance products targeting infectious disease-sensitive industries that show significant correlations between epidemics and business performance, such as tourism or the airline industry," he analyzed.

He added, "As infectious disease outbreaks recur and the coverage gaps for companies increase, proactive discussions on the insurability of infectious disease risks are necessary."

This content was produced with the assistance of AI translation services.