Can a vaccine insurance pool inoculate makers and sufferers?

Can a vaccine insurance pool provide compensation to people who suffer from adverse effects of the Covid-19 jabs with manufacturers demanding immunity from liability claims?

Experts are divided on this aspect.

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Even though product liability insurance policies are there for the vaccine makers to take, insurance experts told IANS that the drug companies may be fearing class action suits if something goes wrong for the Covid-19 vaccine takers and hence the demand for legal immunity.

The Covid-19 vaccine manufacturers -- foreign (Pfizer and Moderna) and Indian (Serum Institute of India) -- are asking the Indian government to `inoculate` them against liability suits due to adverse effects of their vaccine on several people.

Simply put, an insurance pool is an arrangement between the insurers to underwrite a particular business together as doing that individually involves huge financial risk.

The claims, if any, are to be paid out of the pooled money/premium.

"An insurance or reinsurance pool is a compulsion out of: (a) The financial capacity required to support the supply of insurance/ reinsurance is too huge for individual companies or sometimes even national or international markets cannot put up on a standalone basis. Sometimes it is not financially prudent to carry on a solo basis. Example is the nuclear risk and the nuclear liability pool," R. Raghavan, former GM, General Insurance Corporation of India, and the founder-CEO of the Insurance Information Bureau, told IANS.

Continuing further, he said a pool is formed when the estimation of the exposure out of the risk is either too complicated due to technology dimensions or if the extent of diversity of risk occurrence is expansive or frequent, preventing risk management for risk elimination or avoidance. Example for this are space risks, natural catastrophes, terrorism.

The third reason for a pool would be that the risk per capita may be modest but cumulatively can jeopardise any individual insurer, say automobile legal liability, Raghavan said.

A top official of a government owned non-life insurer, preferring anonymity, told IANS: "Without international reinsurance support, Indian insurers will not have an appetite for such risks."

"Whether insurers should jump into this proposition is left to their prudence. The pool comes only if at all insurers want to take a plunge," K.K. Srinivasan, former Member of Insurance Regulatory and Development Authority of India (IRDAI), told IANS.

An industry expert told IANS on the condition of anonymity that the vaccine makers fear class action suits which may lead to huge claims payout in case of adverse effects of their product.

He said the pool could be formed with local capacity or with reinsurance support.

"A pool cannot have unlimited liability. Its liability has to be capped. A Covid-19 vaccine pool will be of short-term duration and may not be viable. In the case of a short-term pool, after a specified period, the corpus is paid back to the contributors. On the other hand, if one brings in all the vaccines under the pool then it could be on a long-term basis and sustainable," he added.

According to another senior official governing the insurance sector, the Covid-19 vaccine is still in `work in progress`` mode, meaning, its risk has not played out.

"A pool comes into play when the risk is played out. As of now, Covid-19 vaccine is a risk that is underway for many countries. Perhaps in three/four months some patterns may emerge on insurance coverage and the pool," the official preferring anonymity told IANS.

If issues like jurisdiction are clearly ring fenced to India, the government can look at the PM Fazal Bhima Yojana model. Create desired capacity with active and competitive participation of insurers and reinsurers. Draw upon internationally agreed limits of liability, Raghavan said.

"By stretching this, one can even invite capital markets participation by issue of indemnity bonds, that can be liquidated on awards by Indian Courts, serviced by decent interest rates till then," he added.

Be that as it may, it is also not known whether the vaccine makers will reduce their price if such an immunity is given to them, as the price also factors insurance, risk of litigation and compensation.