Can ‘Ebola-mania’ Give Way to a National Reset?
Ebola is not a new contagion and it is one for which the United States has been preparing for since at least post-9/11 heightened bioterrorism concerns.
While some may be critical of the care provided to the first patient with Ebola in Dallas, as well as resulting communication issues involving hospital and medical officials, clearly all involved intended to do their very best under uniquely stressful conditions that rarely any American hospital had faced before.
In what will surely be a repeating pattern in the near-term, American hospitals, clinics and doctors, as well as employers and other entities will continue to periodically encounter individuals that have acquired the Ebola virus and require treatment. The country will also have periods where there may be no known cases.
As of Nov. 11, and for the first time in 41 days since the initial U.S. patients, there were no known cases of Ebola in the U.S. That was short-lived as within days thereafter a surgeon who had contracted the Ebola virus in West Africa was transferred to the United States for treatment, but unfortunately the patient died.
I believe we should attempt a national “reset” to manage this public health issue in America — based on science and evidence.
In order to do so, it is important to understand the causative factors leading to the arguably explicable initial national panic surrounding Ebola. In the early moments of a risk crisis, leaders get limited chances to establish credibility and trust. The populace and media want to know the risk is understood and under control.
Early slips in Dallas failed this test, as I mention in my first article on this subject.
While some may feel on edge with regard to changing CDC guidance, in fact, the CDC is adjusting to new information and changing their guidelines appropriately; not dissimilar to how managers of risk adjust to any hazard exposure.
As managers of risk, we should be assessing the risks Ebola presents.
Ebola is really no different than other significant risks (e.g., terrorism post-9/11, Y2K, swine flu, grounding of certain airplanes).
There is a common pattern that moves from initial organic obsession to an easing, understanding, and respect of the risk that becomes balanced with other important considerations such as civil liberties, promoting international health, and maintaining world economic balance, for examples in the context of contagion risks.
For the emerging risk of Ebola in America, we are at a pivotal point to learn from the recent past and venture forward with the best of science and evidence-based risk management.
Will America press the reset? As risk managers, we stand in an influential position within our organizations to utilize the proven methods and tools of managing enterprise risks, including contagion risk.
As such, risk managers are in a unique position to lead with others; to reset the response to the Ebola virus in our unique national microcosm and move to a balanced American view appropriately and respectfully managing our interests while simultaneously attending to world health risk issues, especially in West Africa.
Read all of Jeff Driver’s Risk Insider articles.
A Failure of Trust
‘Ebola-mania’ is my term for significant reactions to known public health and risk management issues associated with the Ebola virus.
The arrival of Ebola in the United States has been marked by fever-pitch reactions of alarm that ranged from cries for international travel bans, school closings, state-required quarantines of individuals, airport passenger health screenings, and even calls for national nursing union labor strikes over claimed unsafe hospital working conditions.
Now, let’s take a big collective national breath. Could it be that what first appeared to be a public health crisis turned out to be more of a significant crisis in public confidence?
Could it be that for America, Ebola is not as significant a risk as it is for the far less advanced medical systems in West Africa where over 5,000 people have died after contracting the virus?
But this fall, in different ways, U.S. hospitals, the Centers for Disease Control and Prevention, as well as state and federal governments arguably failed to fully establish credibility with a hungry media and scared public, exacerbating what should have been a manageable Ebola outbreak.
A trifecta of public confidence shaking moves occurred when missteps were made in treating the first U.S. Ebola patient, accurately communicating with the public, and protecting treating medical providers from contracting the virus.
First, a patient with a history of fever and travel from West Africa was discharged from a hospital back into the community. Then, information about the patient’s temperature being no greater than the CDC threshold of 101.5 degrees to trigger a serious Ebola concern had to be corrected; and once the patient was readmitted, officials failed to clearly explain delays in blood transfusion from an Ebola survivor and the administration of an experimental drug (Brincidofovir), both which had shown promise in treating Ebola.
Perhaps most alarming, the involved hospital has not been able to explain how two of its nurses contracted the virus, instead seeming to point the finger at the CDC for frequently changing protective gear guidelines and “frustrating” hospital employees and management.
Subsequent blows to public confidence stemmed from uncertainties around CDC guidelines on personal protective equipment (PPE) for health care workers and the 21-day quarantine guideline for individuals exposed to the Ebola virus.
First, with regard to PPE: After two nurses in Dallas tested positive for the Ebola virus, the CDC changed PPE guidelines to ensure there would be no ambiguity about leaving no skin exposure. It detailed step-by-step instructions to put on and take off the equipment safely, as well as the necessity of having a trained monitor to supervise the process.
Then, there are the still unresolved questions surrounding the necessity of a 21-day quarantine for individuals potentially exposed to the Ebola virus.
The several different approaches to contain the virus from individual states, the CDC and the military have not been resolved, and the current interim CDC recommendations at this point are based on transmission risk assessment.
In part II of this article on Ebola, I will focus on the way risk managers should reset the response to Ebola.
Read all of Jeff Driver’s Risk Insider articles.
Passion for the Prize
In his 1990 book, The Prize: The Epic Quest for Oil, Money and Power, Pulitzer Prize winning author Daniel Yergin documented the passion that drove oil exploration from the first oil well sunk in Titusville, Penn. by Col. Edwin Drake in 1859, to the multinational crusades that enriched Saudi Arabia 100 years later.
Even with the recent decline in crude oil prices, the quest for oil and its sister substance, natural gas, is as fevered now as it was in 1859.
While lower product prices are causing some upstream oil and gas companies to cut back on exploration and production, they create opportunities for others. In fact, for many midstream oil and gas companies, lower prices create an opportunity to buy low, store product, and then sell high when the crude and gas markets rebound.
The current record supply of domestic crude oil and gas largely results from horizontal drilling and hydraulic fracturing methods, which make it practical to extract product in formerly played-out or untapped formations, from the Panhandle to the Bakken.
But these technologies — and the current market they helped create — require underwriters that are as passionate, committed and knowledgeable about energy risk as the oil and gas explorers they insure.
Liability fears and incessant press coverage — from the Denton fracking ban to the Heckmann verdict — may cause some underwriters to regard fracking and horizontal drilling with a suppressed appetite. Other carriers, keen to generate premium revenue despite their limited industry knowledge, may try to buy their way into this high-stakes game with soft pricing.
For Matt Waters, the chief underwriting officer of Liberty Mutual Commercial Insurance Specialty – Energy, this is the time to employ a deep underwriting expertise to embrace the current energy market and extraction methods responsibly and profitably.
“In the oil and gas business right now, you have to have risk solutions for the new market, fracking and horizontal drilling, and it can’t be avoidance,” Waters said.
Matt Waters, chief underwriting officer of Liberty Mutual Commercial Insurance Specialty – Energy, reviews some risk management best practices for fracking and horizontal drilling.
Waters’ group underwrites upstream energy risks — those involved in all phases of onshore exploration and production of crude oil and natural gas from wells sunk into the earth — and midstream energy risks, those that involve the distribution or transportation of oil and gas to processing plants, refineries and consumers.
Risk in Motion
Seven to eight years ago, the technologies to horizontally drill and use fluids to fracture shale formations were barely in play. Now they are well established and have changed the domestic energy market, and consequently risk management for energy companies.
One of those changes is in the area of commercial auto and related coverages.
Fracking and horizontal drilling have dramatically altered oil and gas production, significantly increasing the number of vehicle trips to production and exploration sites. The new technologies require vehicles move water for drilling fluids and fracking, remove these fluids once they are used, bring hundreds of tons of chemicals and proppants, and transport all the specialty equipment required for these extraction methods.
The increase in vehicle use comes at a time when professional drivers, especially those with energy skills, are in short supply. The unfortunate result is more accidents.
“In the oil and gas business right now, you have to have risk solutions for the new market, fracking and horizontal drilling, and it can’t be avoidance.”
— Matt Waters, chief underwriting officer, Liberty Mutual Commercial Insurance Specialty – Energy
For example, in Pennsylvania, home to the gas-rich Marcellus Shale formation, overall traffic fatalities across the state are down 19 percent, according to a recent analysis by the Associated Press. But in those Pennsylvania counties where natural gas and oil is being sought, the frequency of traffic fatalities is up 4 percent.
Increasing traffic volume and accidents is also driving frequency trends in workers compensation and general liability.
In the assessment and transfer of upstream and midstream energy risks, however, there simply isn’t enough claims history in the Marcellus formation in Pennsylvania or the Bakken formation in North Dakota for underwriters to rely on data to price environmental, general and third-party liability risks.
That’s where Liberty Mutual’s commitment, experience and ability to innovate come in. Liberty Mutual was the first carrier to put together a hydraulic fracking risk assessment that gives companies using this extraction method a blueprint to help protect against litigation down the road.
Liberty Mutual insures both lease operators and the contractors essential to extracting hydrocarbons. As in many underwriting areas, the name of the game is clarity around what the risk is, and who owns it.
When considering fracking contractors, Waters and his team work to make sure that any “down hole” risks, be that potential seismic activity, or the migration of methane into water tables, is born by the lease holder.
For the lease holders, Waters and his team of specialty underwriters recommend their clients hold both “sudden and accidental” pollution coverage — to protect against quick and clear accidental spills — and a stand-alone pollution policy, which covers more gradual exposure that unfolds over a much longer period of time, such as methane leaking into drinking water supplies.
Those are two different distinct coverages, both of which a lease holder needs.
Matt Waters discusses the need for stand-alone environmental coverage.
The Energy Cycle
Domestic oil and gas production has expanded so drastically in the past five years that the United States could now become a significant energy exporter. Billions of dollars are being invested to build pipelines, liquid natural gas processing plants and export terminals along our coasts.
While managing risk for energy companies requires deep expertise, developing insurance programs for pipeline and other energy-related construction projects demands even more experience. Such programs must manage and mitigate both construction and operation risks.
Matt Waters discusses future growth for midstream oil and gas companies.
In the short-term, domestic gas and oil production is being curtailed some as fuel prices have recently plummeted due to oversupply. In the long-term, those domestic prices are likely to go back up again, particularly if legislation allows the fuel harvested in the United States to be exported to energy deficient Europe.
Waters and his underwriting team are in this energy game for the long haul — with some customers being with the operation for more than 25 years — and have industry-leading tools to play in it.
Beyond Liberty Mutual’s hydraulic fracturing risk assessment sheet, Waters’ area created a commercial driver scorecard to help its midstream and upstream clients select and manage drivers, which are in such great demand in the industry. The safety and skill of those drivers play a big part in preventing commercial auto claims, Waters said.
Liberty Mutual’s commitment to the energy market is also seen in Waters sending every member of his underwriting team to the petroleum engineering program at the University of Texas and hiring underwriters that are passionate about this industry.
Matt Waters explains how his area can add value to oil and gas companies and their insurance brokers and agents.
For Waters, politics and the trends of the moment have little place in his long-term thinking.
“We’re committed to this business and to deeply understanding how to best manage its risks, and we have been for a long time,” Waters said.
And that holds true for the latest extraction technologies.
“We’ve had success writing fracking contractors and horizontal drillers, helping them better manage the total cost of risk,” Waters said.
To learn more about how Liberty Mutual Insurance can meet your upstream and midstream energy coverage needs, contact your broker, or Matt Waters at firstname.lastname@example.org.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.