Property/casualty insurance for senior living facilities has taken a hit this year. The insurance market has been hardening for the last year or two, and the COVID-19 pandemic brought on a wave of new challenges that has only compounded the problem. Brokers who are working with these health care organizations should be particularly wary of increased liability and more stringent underwriting as we move into 2021.
This past year has only accelerated the pace of premium rate increases that the senior living world was already facing. Insurance companies are reluctant to provide coverage for organizations because they carry inherent risk. As a result of the intense media coverage and negative publicity directed at the senior living industry, we anticipate families are more likely to file negligence, quality of care issues or wrongful death claims as a result of COVID-19. The expectation among insurance company executives and plaintiffs’ attorneys are that the COVID-19 related liabilities are going to impact the liability market for the next several years. Even with strong risk management plans in place, senior living facilities cannot eliminate this liability altogether.
With COVID-19, the potential for liability claims could far outpace collected premiums. Paying out more in claims than they’re bringing in has forced insurance companies to raise rates. Some insurance companies have elected to stop insuring these organizations altogether, which also drives up rates. It’s a supply-and-demand marketplace. When there is significantly less supply, the cost rises. Even newer carriers in this space are being hit with higher than expected claims volumes.
None of this is good news for senior living operators who, historically, have already been operating on thin margins. Over the past several months, they have taken on significant additional expenses to disinfect facilities and obtain additional personal protective equipment.Now, they are faced with the fact that most of the major insurance companies who provide professional and general liability coverage are in the process of adding COVID-19 exclusions. This is almost certainly going to be a universal change for future policies, and brokers should start informing clients to prepare for this at their next renewal. Clients will likely be facing additional exclusions and rising rates for the foreseeable future as insurers continue to grapple with the effects of this tumultuous year and what lies ahead.
The bottom line heading into 2021 is that everything is more challenging and taking more time. The liability impact and escalating rates have clients and insurance companies determined to do their due diligence and avoid more financial fallout. Underwriters are scrutinizing risks more closely than ever. Agents and brokers need to demonstrate that their clients are meeting the insurance companies’ requirements before they can secure coverage.
In order to prepare for extremely lengthy and protracted renewals, agents and brokers should be starting the process earlier than under normal market conditions. Their aim should be to be as proactive as possible. Most insurance companies are now requesting a COVID-19 questionnaire. These questionnaires ask reasonable questions about what’s going on in the facility, what additional safety measures have been put in place, how many cases of COVID-19 the facility has had, and how they were dealt with. This might make some clients nervous, but it actually creates an opportunity for open and honest dialogue.
A big part of the agent’s job now will be to proactively manage cases and help to prepare clients for anticipated and unanticipated financial challenges. Hopefully, there will soon be a vaccine and abatement of the virus, but even with a solution, we are unlikely to see premiums decrease for the foreseeable future. Agents and brokers will need to take the lessons learned in 2020 with them into the next year. The organizations that thrive will be those that have maintained financial stability and improved their operations to effectively manage and minimize the spread of disease. Hopefully, no matter what the new year holds, we will have learned enough to ensure that we will be better prepared for what lies ahead.
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