CONTACT TRACING TO MITIGATE RISK

How agents and brokers can help clients address future pandemic issues

By Mike Steere

Business interruption insurance remains a dynamic topic as insurers, governments and businesses plan for the next pandemic.

For background, a July 2021 report from the Department of the Treasury estimates that payouts from business interruption insurance claims due to COVID-19 had been low—approximately $1.3 billion. However, only 2% of claims were accepted, the report noted, and subsequent initiatives—including those by the Treasury—were advanced to identify new coverage options that better protect businesses in future pandemics.

In light of those developments, it looks like COVID-19 experience provides no future guarantees that the next pandemic won’t carry a more significant impact.

This should lead the insurance industry to consider the question: How can we help clients to better manage their risks and reduce the impact that a future pandemic will have on their operations?

Formal contact tracing initiatives have emerged and evolved over the past two years, as a result of the successive waves and variants of the COVID-19 pandemic. These programs, implemented by various state and county departments of health, are designed to interrupt the transmission of COVID-19 and protect people.

Some businesses have implemented their own contact tracing programs to quickly and easily identify close contacts of confirmed virus cases so they can be isolated to slow or even stop the spread of a virus in their workforces. This enables healthy employees to continue working unimpacted, and the company can effectively manage its operational risks, maintain productivity and business continuity. It also helps to avoid large clusters developing and the loss of many workers at once, as many businesses experienced during the peak waves of COVID-19.

Encouraging clients to contact trace

Ultimately, a formal contact tracing program is a way to reduce the risk that an infectious virus poses by reducing the reliance of client businesses on various insurance policies or vehicles during these periods.

For agents, advising clients on the value of implementing workplace contact tracing affords them the opportunity to build success with customers on multiple layers. First, by encouraging implementation of a “pandemic-ready” contact tracing program, they help position the client’s business to better cope and protect its workers when the next pandemic or serious COVID variant arrives. Second, approaching this as a strategic discussion together with clients helps strengthen relationships around combined long-term objectives.

Third, contact tracing protects stake- holders along a client’s supply and value chain. Any loss in productivity or failure to deliver services and solutions will impact these entities and may necessitate an insurance claim against the company, or by the company to recover any losses. And last—but vitally—implementation of a contact tracing program that’s ready to be deployed at a moment’s notice can help reduce the financial impact of the next major health event.

There are many ways agents can approach this. Rather than waiting for the next pandemic or variant to strike, a logical approach is to prepare ahead of time.

Ideally, insurance agents should approach contact tracing with clients as part of an overall strategic risk planning analysis. Discussions should be detailed, with the objective focused on reviewing COVID-19 and pandemic impacts on the business and identifying opportunities to be better prepared for the next variant or virus and to be less dependent on insurance as a risk mitigation strategy.

We’ll look at how to do this in more specific detail later in the article.

Addressing operational and production risks and revenue loss

Contact tracing protects a company from operational and production risks by ensuring that the maximum number of its workers remains available at all times, and that they can deliver the required services and solutions. This significantly benefits the business from a revenue-generation perspective.

Besides slowing the spread of the virus by accurately identifying close contacts of confirmed cases, a professional contact tracing system also avoids unnecessary isolation of workers caused by inaccurate means of determining close contacts.

For agents, advising clients on the value of implementing workplace contact tracing
affords them the opportunity to build success with customers on multiple layers.

Contact tracing also can efficiently deliver key data to business, human resources, occupational health and safety, and risk management departments. This can offer them greater insights into the operational capabilities of their business as well as the potential impact of the virus on its revenue flow and profitability. The value of this should not be underestimated. A May 2020 paper co-authored by Robert Hartwig, Ph.D., CPCU, and The American Property Casualty Insurance Association reported business continuity losses due to the pandemic at approximately $1 trillion per month in the United States alone.

Agents should have a two-part discussion with their clients to help them evaluate how the business has managed during the COVID-19 pan- demic and determine how their business might benefit from contact tracing.

Here are some key questions that agents should be asking their clients during the first part of their discussion:

1. How did worker absences from both illness and isolation impact them?
2. In terms of service and solution delivery, what type of backlog was there and how long did it take for the company to “get back to normal?”
3. How did they reassure suppliers, partners, and customers that they were in control of the pandemic in their organization?
4. Did they consider or apply for insurance assistance during the pandemic?
5. Was there any impact to their reputation because of not being able to deliver services and solutions?
6. Was any legal action taken against the company as a result of it not being able to meet its contractual obligations?
7. And finally, did they employ a proven contact tracing program to help mitigate the impact of the virus in their workforce?

Based on responses to these questions, agents could then initiate the second component of their discussion that would focus on the loss of revenue their business faced as a result of not having a contact tracing protocol in place. This is important because many businesses had a chastening experience after they wrongly assumed that they could recover lost revenue by claiming for it in their insurance policy.

Data published by the National Association of Insurance Commissioners (NAIC) in November 2020 highlights this issue clearly. Of more than 210,000 insurance claims reported, only 3,648 had some form of payment accepted—less than 2% of all claims.

No doubt insurance agents were under significant pressure to help clients with their lost revenue claims. Reporting back on denied claims and dealing with dissatisfaction and additional questions from multiple clients put agents and their teams under pressure.

Decreasing business interruption risks, improving resilience

To deal with viruses that spread at an exponential rate through an organization requires that the organization be prepared ahead of an outbreak to respond in a way that effectively mitigates risk and keeps a company operating at a “normal level” as far as possible. There are a number of plans businesses can have in place to ensure continuity of operations. Business continuity plans that have been tested and proven are important. Other key plans include crisis communications, disaster recovery, and emergency management.

Contact tracing has become an important component of many of these resiliency and risk reduction plans. Due to the volatile environment in which they operate, a company’s contact tracing plan must also be formulated and tested ahead of time.

If a company automates its contact tracing process to further reduce their risks of business interruptions, processes must be implemented to ensure that the systems selected can be delivered at a moment’s notice. This requirement is no different than situations where a company will require its business continuity partner to guarantee access to its off-site recovery facilities as soon as a critical event occurs.

While agents may not get involved in the actual resiliency planning process, they should encourage clients to prepare a contact tracing program that is pandemic ready and can be immediately deployed when needed. Now is the time to do this.

Helping clients take this proactive approach will:

1. Help to avoid interruptions to the delivery of services and solutions.
2. Contribute to greater productivity and profitability when the next virus strikes.
3. Reduce the need to claim loss of revenue and reduce the chance that claims will be denied.

Duty of care

Insurance agents should make their clients aware of how contact tracing relates to their duty-of-care obligations. Duty of care requires decision makers, particularly those at the C-suite level, to take all reason-able steps to ensure that all parties are kept safe, healthy and secure while in their employ and/or on their premises.

Contact tracing falls within the gambit of a company’s duty of care because it helps the employer fulfill its obligation to look after employees and contractors during a pandemic.

This is important from multiple perspectives:

1. Ensuring the safety and well-being of workers helps to enhance their perception of the company. During a public health crisis, these employees will be confident when they come to work, knowing that their employer is taking necessary steps to look after them.
2. A thorough contact tracing program that protects workers provides assurances and a positive image to partners, customers, shareholders, and the wider community, including the employees’ families.
3. Finally, ensuring that the company fulfills its duty of care through a contact tracing program reduces exposure to litigation from employees over illness contracted in the workplace or the employer maintaining an unsafe workplace. According to a January 5, 2021 USA Today article, this proved to be a significant issue during the COVID-19 pandemic, with more than 1,000 lawsuits related to COVID workplace issues being brought in 2020 alone.

Companies that embrace their duty-of-care responsibilities enhance their risk management capabilities at work and greatly reduce their insurance risks.

Getting the contact tracing ball rolling

Some companies may see implementing contact tracing as a laborious process. As a result, any suggestion made by an insurance agent to their client could be met with resistance from the client.

The fact is the risk of not being pro- active and prepared and being caught unaware are just too high. Should clients push back against their agent’s suggest- ions; they can be encouraged to retrospectively look at how their company and their industry sector were impacted by the successive rounds of COVID.

Other strategies available to agents to help build the business case for contact tracing and get their clients to become pandemic ready include discussing:

1. The risks of not having contact tracing, including insurance and cost/productivity impacts.
2. The impact that not being prepared has on the company’s supply and value chain, and on its reputation.
3. The barriers to entry of becoming pandemic ready and being able to implement contact tracing with short notice.
4. The value of an integrated approach to managing risks across the enterprise.

Helping clients understand the importance of workplace contact tracing is a key step toward improving their business resilience and risk management while also reducing insurance claims. Preparing for the next pandemic is undoubtedly a mutually beneficial exercise for businesses, employees, stakeholders and their insurance partners.

The author

Mike Steere is a co-founder of SaferMe (www.saferme.com), a contact tracing and safety software company with products used across more than 30 countries. Through the pandemic, he has worked with Fortune 500 businesses and other well-known international organizations, helping them to maintain productivity and continuity of operations. Contact him at mike.steere@safer.me.