The world is changing fast and to keep up you need local knowledge with global context.
In a bumper Episode Five of this podcast series, we draw on Biznews’s partner, the Wall Street Journal, for a report on a potential Covid-19 catastrophe in relatively defenceless Africa; Discovery SA’s chief Hylton Kallner explains how the reaction to this pandemic is sure to transform society; some good news for South Africans as a local company donates enough Chloroquine Phosphate to help 40,000 potential patients, a drug that has been effective in Asia to reduce hospital time for Covid-19 patients. Scientist Prof Alan Whiteside provides perspective on the latest developments, including the UK’s bet on antibody tests, and from Bloomberg on a day when US confirmed infections surge by 46% to almost 70,000, we hear of a New York City healthcare system that is on the verge of collapse. – Alec Hogg
First, today’s Covid-19 headlines:
- Global infections of Covid-19 rose above 500,000 Thursday, with Italian deaths surpassing 7,500 from almost 75,000 confirmed cases. Infections have mushroomed for the past few weeks, making Italy the epicentre of the European arena of the crisis. But although infections rose by 5,000 on Wednesday this represents a slowdown to 7.5% daily growth. That is in stark contrast to the United States where confirmed infections rose 48% Wednesday to 69,197. South Africa’s infections, over 700 Wednesday, are growing at 28% a day, consistent with the experience of other countries in the early stage of the pandemic. The 21-day lockdown from midnight Thursday is designed to flatten the infection growth curve.
- UK Prime Minister Boris Johnson describes testing kits which show whether someone has had coronavirus as a “gamechanger” for a country which yesterday had 9,640 confirmed infections and 465 deaths. Johnson says over 3m of the kits which test immunity will be available from Amazon and Boots within weeks. Scientists believe around 80% of those who contract Covid-19 are only mildly affected, but because they generate immunity would be safe to return to work.
- South African businesses are reacting in unusual ways to the crisis. Construction group WBHO yesterday cancelled the payment of an 80c a share dividend, retaining cash of around R50m that would have been distributed. Discovery has sent 8,000 staff home, having prepared for the crisis for the past two and a half months while recruitment company Adcorp announced a 30% drop in its fees for as long as the crisis lasts.
- US weekly jobless claims surged by almost 15-fold, from 282 000 to 3.282m – an unprecedented increase. Stanlib economist Kevin Lings says there is a close correlation between jobless claims and unemployment, which on these numbers looks set to surge to between 6% and 7%. Wall Street shrugged off the news, as did the JSE – both markets continuing their recovery.
Hylton Kallner is the chief executive of Discovery for Southern Africa. You’re a man of numbers and you’ve been watching the expansion as many people are of Covid-19 on the John Hopkins website. I see today it’s now 475,000, America’s gone up 46% overnight in infections. The exponential reality seems to be kicking in today.
The sort of the numbers when you stack them up obviously do look frightening. I read an interesting paper that in fact what you’re seeing is statistically an aggregation of normal distributions. While in totality the sort of the numbers take on what’s called a gaussian distribution, in essence you see multiple normal distributions coming on stream simultaneously. That is the effect that we then see. The US is sort of a function of that, where you’ve got multiple markets that are now going through that curve. So hopefully each market follows a similar curve to what we’ve seen in countries like South Korea, Singapore and China, where we’re then levelled off in a more normal fashion. In the early stages as you stack up you get a massive exponential effect that we are observing now.
Including South Africa with the overnight numbers 28%, in line with that 30% day daily growth.
Yes, credit to the South African Health Ministry and the approach that they’ve taken. We’re doing extensive testing so you will see that effect coming through, that’s to be expected and it has necessitated the lockdown that we’re about to enter.
Extensive testing for the virus, but what about people recovering? Obviously it’s very early days in South Africa but there’s already talk about trying to test people who’ve had the virus so that they can go back to work or must get a clean bill of health. Is that something that’s possible in this country?
We aren’t seeing that just yet. It is something in other parts of the world that is coming on stream. Many people would have had the virus without experiencing serious symptoms and so it is an important part of the cycle to be able to understand it.
How does that work, that people get the virus but don’t show anything?
I’m not a clinician but the studies that have been done in some of the other countries in particular China indicate, people present it, do not all present the same symptoms. So they’re seeing about 70% or 80% would have a fever and dry cough, and other other symptoms like fatigue. The most serious symptoms are a respiratory in nature, tight chest and inability to breathe. But they vary and highly correlate with age and other comorbidities. Some people may have it and experience it as a fairly minor flu, that’s what you hope for.
Thinking about health insurers and companies like Discovery who suddenly, many of their members might be sick from something else, whereas they might have gone to bed and had a Disprin in the past, they are now going to be concerned about it. What’s the impact on you?
We are seeing a number of fascinating impacts from an actuarial perspective and a behavioural perspective. We’ve seen a significant increase in GP consultations. There’s a spike in people having obvious concern around what would ordinarily be a flu or other sort of common virus and significant decrease in more elective surgeries in hospitals as people shy away from hospitals and try to free up the resources of frontline care which is important. It is the July effect coming through within our client base. Other behavioural changes like fewer and fewer people going to gym and other areas where they may be exposed to high density populations, social distancing and self quarantine. People drive much lower distances and we were able to monitor that through our customer base. We’re seeing the effect play out in many different ways across the business.
What about people going to gym less, part of the whole Vitality program is to encourage them to change to a healthy lifestyle? Are you adjusting your requirements?
We’ve created what we call Vitality at home, a fully customised version of Vitality that’s really tailored towards members being able to exercise and encouraging them to exercise while they are at home. It’s a critical part of overall health and wellbeing and mental health. We immediately froze the requirement for our members to attend gym at least 36 times a year to maintain their benefits. So that was frozen for a couple of weeks as we started to see Covid-19 emerge in the country. We’ve got an incredibly popular program in active rewards where over half a million members engage every week and try and achieve the physical activity goals in order to earn a coffee or other rewards such as Discovery Miles. We’ve reduced the target goal for the week to 300 points from 900, it’s a significant reduction. It implies that people should be walking about 5,000 steps a day in order to maintain activity or they could use one of the services where we stream exercise classes online encouraging our members to exercise at home. If they’ve got a wearable device, they’re able to earn points points through that. We’ve tried to ensure that people are encouraged to be active at this time. We have hanged some of the rewards to focus more on areas like healthy food and pharmacy goods like healthcare and so forth.
It’s early days, but streaming is fascinating. I know with my own yoga studio, they’ve started streaming classes as well. Have you seen the take up?
I was watching this morning, one of our instructors who was streaming a class for Vitality and at the time there were about 400 people participating live and hopefully we’ll see that climb to the thousands very quickly.
From a more philosophical perspective, this surely is going to accelerate the move towards the Fourth Industrial Revolution. As an example one person can stream to a class 400 people whereas you wouldn’t have that kind of attendance at a normal gym.
Yes, I think it’s changing the way we do business everywhere. Our financial advisors are now consulting and advising clients and it’s an important time. If you think about the volatility in the markets and the need for insurance in particular known medical insurance and life insurance are more relevant than probably ever before. They are operating offshore, offering advice using video conferencing as a primary communication mechanism. We’ve had to cater for that with full digital applications and ability to process new clients fully digitally. It will change the way that we operate for a long time.
One doesn’t think about that. Presumably there must have been a spike of people worrying, well this is a deadly disease particularly if you’re older, have you seen more inquiries for life insurance?
We’ve seen a steady and increasing trend over the last few weeks. The need is real and people are responding to that. From a medical scheme perspective we’ve seen a spike and in some of our life insurance areas, particularly amongst professionals I think it’s been identified as a very clear need for them.
From a financial point of view, if you have more demand on your health insurance and clearly one would presume that there is a higher risk of mortality with this new Covid-19 coming in on the life insurance. Do you have to adjust your rates that you charge? Do you have to maybe reduce the amount of people you accept?
The underwriting that we apply we’ve kept fairly consistent and insurers around the world, part of the reserving requirements take into account things like pandemics. You don’t expect these to happen on a regular basis but when they do and I think the industry is well equipped to deal with this from a financial solvency and liquidity perspective. We don’t anticipate much change from that perspective. It’s also important to bear in mind that while Covid-19 presents a unique and unprecedented challenge in terms of infection rates and will impact particularly for the elderly and those that have multiple chronic conditions, the core market for insurance is typically people in their 30s to 50s and in that segment the mortality morbidity impact hasn’t been observed to be that material.
If we had a different president in this country, and if the decision was to not send everybody home for the 21 day lockup would that have had much of an impact looking at it from the actuarial perspective on your business.
We have had an impact on South Africa and in broader society, there is no doubt that the real impact is going to be felt in health care delivery and in the facilities. It’s important to free up and ensure that we’ve got sufficient capacity to handle the volumes that we anticipate are going to be moving into the facilities. From our perspective as an employer, we started about a month ago with a range of arrangements or initiatives to protect our staff to ensure business continuity and protect health professionals, our partners etc. We’ve been gearing up for this for some time already all the way to having a parking lot full of hired cars to ensure that our staff perform essential functions over this period are able to move to and from the office without using public transport. So it’s been a massive logistical exercise. We’ve sent home about 8,000 staff who are now working from home within our existing infrastructure. We continue with minimal disruption. From an organisational perspective we’ve been able to manage it but I think in the absence of taking these steps the healthcare system would have really been under immense pressure and far more than we hopefully will experience given the steps taken by the president.
From a practical perspective as many as 8,000 people home, Do you buy them laptops, do you give them data?
We’ve been operating with a consistent workforce of about a thousand people from home for some time now. In fact it suits a lot of people who seek flexible working hours, it makes sense from our perspective just in terms of cost efficiency. It’s something we have had in place. Many people operate with laptops. We’ve got a lot of people at home setups who would have desktops, the connectivity is always a challenge. In most cases we’re using fibre or reverse billing on hard lines to ensure connectivity over this period. We have to be a bit more flexible and we are using mobile data as well. In essence we continue to operate and the sort of infrastructure set up for Discovery’s whole model is about behavioural change for the better.
Now given what society is going through with Covid-19, when we look at the other end will we be changing behaviour for the better?
Covid-19 is going to change the entire society and the way that we live and operate. It is what we have seen in areas and countries like China, where the behaviours do change post Covid-19 as people start to get back to work and return to normal. That’s inevitable but hopefully we’ll learn a lot of lessons in terms of how we work, how we operate and how we approach healthcare in general and think about the collective good. It’s one of your points around exponential, if you can stop one person from infecting many others you really have a massive impact in terms of the entire system. Hopefully that’s something that we will take away from this.
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