The Changing Risk Landscape for Care Providers and its Impact on Insurance
It is common knowledge that the coronavirus pandemic has brought huge challenges to the UK care sector. The increased demand for care across all sectors and the change to the way in which it is delivered means operators have had to become more flexible and responsive. This has only been possible by the hard work and dedication of those working within the industry.
All care sectors have faced similar issues during this pandemic, whether within disability care, adult care or children’s care, but elderly care is facing an additional challenge – to try and find suitable insurance for their business.
At Barnes Commercial we have seen a change in the insurance landscape for the elderly care sector as a direct result of COVID-19. There have been increases in the premiums required by insurers for many insurance packages as potential risk increases and appetite for the sector diminishes. We have taken a look at the challenges facing providers of elderly care in the UK and why these increased risks have had such an effect on the insurance market.
We know that at the beginning of the outbreak back in March, many companies operating care facilities were not included in vital government plans to provide suitable PPE, financial support and workforce planning.
Many UK care homes in the elderly care sector struggled to control outbreaks within their facilities as COVID began to sweep across the country. By the very nature of the working conditions and relationships between patients, families and staff, it was easy for the virus to spread causing worry.
PPE was a cause for concern; locating the right type and in the right quantities left many care providers without the right protection. The much needed guidance for COVID-19 PPE recommendations for care home workers was first published on the 17 April but updated on 2 November 2020, providing more detailed information about the types of PPE to use and how to use it and how to dispose of it. (The information can be found on the government website here.)
Staffing has been challenging with vulnerable team members shielding, and isolating colleagues leaving a temporary gap in staff levels following a holiday or from exposure either inside or outside of the care home.
But the biggest ongoing challenge facing elderly care home operators was and remains regular testing and speedy results. Testing is vital to stop the spread of infection and is the best weapon to keep it under control, until the approved vaccine programme is well underway.
However, testing kits have not been widely available, and the UK’s track and trace system hasn’t proved to be robust either. Care home staff are typically tested on a weekly basis, and external visitors are subject to a variety of protective procedures, which can include a temperature check and the signing of a declaration before entering the premises. The good news is that improvements to testing capabilities are ongoing including the recent introduction of regular testing for friends and family, which will come as a welcome relief for many with relatives in care facilities.
So, as restrictions change across the country on a regular basis, care providers have had to adapt and implement new ways of working. This constant change adds additional stress to the workforce and brings increased potential for something to go wrong.
All of the issues above will have been closely monitored by the insurer market as they weigh up the exposure to risk for care providers.
Increased potential risks - a concern for insurers
Care facility proprietors will always put the care and wellbeing of their patients and residents at the heart of everything they do; reputations are built on the exceptional care that is delivered. We should remember that care home settings have always been open to potential risk. Claims can arise for a myriad of reasons, from a claim of medical malpractice to a claim under Employment Liability for an employee fall or injury, but COVID-19 has brought its own set of risks which have increased the potential for insurance claims.
Insurers have been watching the unfolding care sector situation closely as they decide on their response and how or rather if, they have an appetite for cover moving forward.
As an independent insurance broker, we have found locating insurance for operators in the elderly care market increasingly difficult. For other sectors within the care market, such as adult care, disability care and children’s care homes, we are not seeing the same issue.
Matthew Dale, our expert adviser who specialises in insurance for the care sector has spoken to a number of our A rated insurer partners to understand why there is a decreased appetite for this specific care sector.
Matthew said: “Whilst insurers haven’t actually seen an increase in claims so far, the apprehension appears to be around the potential for claims under Employment Liability cover for COVID-19. There is concern about the possible emergence of companies that may offer a ‘no win no fee’ for anyone who has contracted Covid whilst working in a care home, creating a claim culture. Should this scenario arise it could lead to significant reserves having to be put aside for potential claims. It sounds unlikely but this is exactly what happened with PPI only a few years ago. The reasons for claims are certainly very different but we could see the claim culture it invoked replicated for this pandemic.”
Claims may arise from employees, residents or the families of either if something should go wrong. This could be as the result of inadequate PPE or robust procedures to stop the spread of infection within a facility. The potential for claims is high, but without adequate cover in place care homes will be unable to operate.
“We are an independent broker and look across the insurer market to find the optimum insurance programme for our clients. It’s becoming increasingly difficult to place business, which is a problem for everyone. A number of insurers have pulled out of the elderly care market completely and those remaining have increased their premiums to accommodate for an anticipated rise in claims.”
In order to understand why insurers have got cold feet and premiums have increased it’s useful to explain how insurance works.
How does insurance work?
As a care provider, you need insurance cover to protect your business against the unexpected. If your premises were completely flooded or fire destroyed, you need to know that your insurance cover would allow you to rebuild and get your business back up and running. Thinking about the annual premium you pay for this peace of mind, regardless of whether you think it’s a lot or not, it is unlikely that it would actually cover all the costs incurred to recover from the claims incident.
Even if you don’t make a claim within the premium year, you could see your premiums going up for the following year. We’ve all seen this at some point whether commercially or personally. This can be frustrating, but it’s understandable when you really consider how insurance works.
In reality, when you purchase your insurance policy you are pooling your premiums and sharing the risk with many other businesses who take out the same insurance. If any of you have a claim you will be covered; the premiums collected will have formed a large reserve of funds and will be sufficient to satisfy the claims made. However, things start to be a cause for concern when everyone needs to make a claim. The pool of funds available will diminish and the risk for the insurance company increases, and therefore, so do premiums.
Historically insurance premiums for the elderly care sector have been set at relatively low levels. For example, a typical premium for a 30-bed care home would cost around £2,000. Whilst insurance companies can’t increase the funds that have been collected to date, the reserve of funds to meet any claims needs to grow – so we’re experiencing an increase in premiums.
Our experience and approach
We have received enquiries from all sectors of the care industry during the Covid crisis including elderly care, children’s homes and rehabilitation centres, and ranging in size from single care homes to multi-site companies. The insurance products being sought are primarily premises cover and liabilities insurance, which typically include public liability insurance and employer’s liability insurance.
For companies operating with a CQC score of good or above, then cover can be arranged without issue. However, for those businesses that ‘require improvement’, it’s a different story with little choice available, if any at all.
We recommend that businesses who find themselves in this predicament create a comprehensive plan of action to put right the elements that need attention. Being able to demonstrate that you are making the required changes will help you to arrange the cover you need.
At Barnes Commercial, we work closely with all our clients, to help them develop their plans to mitigate risk, whether highlighted in a report or not. By working closely with an insurance broker who has experience of the sector can bring peace of mind and ensure that the right cover is in place for optimum protection.
During the pandemic our approach has been about adapting and trying to stay ahead of the market changes in order to offer an honest, informative and consultative approach to providing insurance to the care industry.
Prior to COVID-19 we would have visited a care home to get a greater understanding of risk potential before providing our advice and quotation. Meeting with the owners or decision makers to have an in-depth chat about what matters most to them, ensures advice is tailored and allows us to create a suitable insurance programme for optimal risk mitigation. With face-to-face visits off the table, we have had to be flexible in our approach; we offer online video calls, good old fashioned telephone calls, or email communications, whatever is most convenient.
It’s important that our clients can still benefit from our specialist industry knowledge to get the guidance they need, because getting the right cover in place is paramount to any care home provider – for their staff, their residents and themselves.
Insurance advice for providers of elderly care
Thankfully there are still some insurers who will provide insurance for the care sector and at affordable premiums. Packages are available for care homes in any setting, including elderly care, with a turnover of up to £5M and can be purchased via reputable brokers. At Barnes Commercial, we offer a Business Essentials package which has been specifically created for the care home sector, and includes cover for management liability (Director’s and Officer’s insurance) which is quite hard to come by these days.
We expect to see broader insurance packages returning as the pandemic abates and the approved vaccine programme is rolled out across the country.
We asked Matthew for any additional advice that he would give to our care homes clients during these extraordinary times to mitigate risk.
“I’m sure everyone is already doing so but keep up to date with government and CQC guidelines. Create safeguarding practices, write them up and share with all members of your team so everyone knows the procedures to follow and how to manage a crisis effectively. If following an inspection any issues are raised, ensure an action is put in place and any remedial actions are taken immediately.
“Review and improve cleaning regimes to ensure they are robust and comply with government guidelines. Consider hiring the services of companies with specialist air purifying machines to help with air circulation and ventilation. Try to avoid using agency staff if possible because the change can be unsettling for elderly residents and there is more potential for the virus to be brought into your workplace. If you do use a care agency, make sure you carry out due diligence and check they have employment liability and medical malpractice insurance for their staff.
“If you employ new staff, ensure they are fully trained and put procedures in place to facilitate ongoing training for all employees. Make sure you carry out thorough background checks for new team members or suppliers.”
In summary, it’s all about general good management and an ability to manage risk effectively. Take the time to look at all areas of your business and identify where you are open to risk, putting measures in place to allow business continuity should the unexpected occur.
We are a specialist independent broker offering guidance and advice on managing risk within the care sector. You can find out more about the insurance covers we arrange here or you can call us to discuss how we can help you manage business risk on 01480 272727 today.