Long-term care providers could begin to see some relief this spring from insurance rates that escalated during the pandemic. But a new survey also finds occupancy challenges, cyber attacks and even merger activity could send volatile rates higher again.
Willis Tower Watson’s Insurance Marketplace Realities 2023 Spring Update for senior living and long-term care finds a mixed bag for those seeking to buy or renew coverage, not unlike the broader insurance marketplace.
“We find ourselves in a cautiously optimistic ‘wait and see’ position relative to several factors that can significantly influence outcomes for our industry,” wrote Jon Drummond, WTW’s head of broking for North America. “It’s been a mixed bag. … The long curve, the larger trend, is bending in a positive direction for buyers.”
Property insurance remains one line that’s on the rise, and long-term care has not escaped climbing costs, WTW said in its report, which was published Friday. Nationwide, there were 18 separate disasters that each caused at least $1 billion in damages, according to the National Oceanic and Atmospheric Administration. Several nursing homes and continuing care retirement communities were destroyed or damaged by severe weather in 2022, including Hurricane Ian and winter storm Elliott.
Renewals have been “heavily impacted by catastrophic and non-catastrophic losses” and will likely be the “most challenging for owners and operators,” the report predicted. Property policies are expected to climb by as much as 40% for facilities with occupancy challenges, and by 10% to 20% for buildings without major occupancy challenges.
Insurers are looking closely at valuations, too, given continued cost increases of material, supply chain issues and labor shortages. To contain cost increases, WTW said some owners and operators are increasing deductibles and lowering their limits.
But other lines of coverage, including always pricey liability, are stabilizing with relatively flat or small increases. General and professional liability for long-term care operators should range from flat to 15% increases for providers with prior loss history or poor venue.
“Insurers are reluctant to deploy significant capacity in litigious venues,” including New York, New Jersey, California and Florida, report authors noted. Other less desirable venues are Philadelphia, PA, and Chicago’s Cook County, IL.
How to find lower rates
Financial challenges related to COVID-19 outbreaks and broader economic indicators, such as inflation, are driving added scrutiny by insurers. They continue to be “very concerned” with staffing shortages that might be used to pursue lawsuits and damages based on patient monitoring, falls and wound care lapses.
But providers can take certain steps to find lower rates, WTW said. Those who focus on incident reporting, claim mitigation and policies and procedures will appear to be more attractive customers. The report said insurers are also looking for providers to emphasize clinical program management with a focus on falls management, elopement prevention and infection prevention and control.
The cost of cyber policies is also falling back to routine increases, after rapid growth in the last few years.
Still, even the most proactive providers may face other insurance headwinds this year. Mounting COVID claims, major cyber attacks or mergers and acquisitions activity -— especially deals that put more pressure on a building’s staff — could set off a new round of increases across various types of lines, analysts said.
And resolved economic uncertainty could also heavily influence the remainder of 2023.
“Headwinds caused by economic and social inflationary pressures will continue to adversely influence loss and insurance costs,” WTW said. “The interest rate environment has impacted all and has far-reaching implications in a cash-heavy industry like insurance. That said, the financial markets remain strong, and unemployment is still low. While what 2023 will bring to our economy remains predictably uncertain, our insurance market is, for the most part, telegraphing positive signs for our buyers.”