Moral Hazard and Covid-19
(Insurance) insurance a risk incurred by an insurance company with respect to the possible lack of honesty or prudence among policyholders.”
Collins English Dictionary – Complete and Unabridged, 12th Edition 2014 © HarperCollins Publishers 1991, 1994, 1998, 2000, 2003, 2006, 2007, 2009, 2011, 2014
A few weeks ago, I discussed Loss Control principles as I understood them that could apply to Covid-19 public health protocols such as mask wearing, proper social distancing, etc. It seemed like a sensible approach to the politicization of such protocols in today’s environment. Since that was published, I have read similar opinions relating the subject to risk management principles. That also makes sense to me.
Other thoughts occurred to me over this past weekend, the first such of October 2020, fully seven months into the pandemic. This was the weekend that found us watching our president med evacuated to Walter Reed National Military Medical Center, diagnosed with Covid-19. The news continued with revelations that numerous administration officials and aides also tested positive. As of the time that I am drafting this, the administration has announced that the president will be discharged to return to the White House, which certainly is good news.
Those thoughts lead me to borrow from another insurance term, to describe what appears to me to be the ongoing moral hazard that seems to be evident at this stage of the pandemic. Stay with me here.
Those of us who practice insurance risk management are familiar with the term moral hazard, a definition of which I quoted above. If you merely change the generic definition from insurance specific to society, perhaps you can catch my drift:
A risk incurred by a society with respect to the possible lack of honesty or prudence among its citizens.
If you look at the cost to society due to the lack of prudence associated with inadequate public health practices, due to “pandemic fatigue” or whatever the rationale may be, especially in terms of increased morbidity and mortality as well as the resultant economic strain on citizens, there certainly appears to be a moral hazard present.
Keep in mind that the majority of people seem to be taking this pandemic seriously, however, the rolling spikes in so-called “hot spots” around the nation seem to show that many who do not believe the science of transmission can and are unwittingly spreading the disease. One needs only to look at the 20 neighborhoods in Brooklyn and Queens that Mayor de Blasio wants to shut down again now, or the waves of spikes that occurred across the southern states during the summer and are now evident across the northern tier of states this fall. Couple that with the pending impact to the NFL, now that players are testing positive. Although the majority of those who do contract the disease survive, those who do not, or those who survive with serious after effects, many times are unlucky innocent bystanders who are exposed to those not taking adequate precautions. Many such are first responders, healthcare workers, store clerks, restaurant workers, etc.
Meanwhile, public health professionals work their best to protect us, provide prudent guidance, seek treatments and cures. Society is left to bear the personal and economic burdens for those who lack either honesty or prudence (or both) in the face of this scourge.
In view of the fact that insurance companies know full well the meaning of moral hazard, we note that Covid-19 is now excluded on just about all renewal insurance policies that we see these days.