The marketplace for long-term care liability insurance is increasingly volatile, with greater underwriting pressures and a much more intense focus on profitability, according to a new report on the liability market from the advisory firm Willis Towers Watson.
Liability insurance rates for senior living and long-term care (LTC) providers are expected to go up anywhere from 5% to 30% in 2019, according to the report. But John Atkinson, managing director and leader at the Senior Living and Long-Term Care Centers of Excellence at Willis Towers Watson, told Skilled Nursing News that he’s seen rate increases north of 30%.
“The gravity of the rate increase, or the size of the rate increase, is specific to individual risk characteristics of the operator, related to venue or jurisdiction issues, acuity levels, and the loss history of the specific account,” he noted.
The volatility might also reflect the “right-sizing” of accounts that have been underpriced for a period of time, Atkinson added.
SNFs are no stranger to high liability insurance bills; Willis Towers Watson’s spring 2018 commercial insurance update found expected increases for the current year ranging from 5% to 20% and a decreased capacity as carriers either cut back on their LTC presence or exit the space entirely.
More of the same is predicted for next year, according to the “Marketplace Realities 2019” report. Some of the factors compounding risks in the sector include class action lawsuits, natural disasters, and expanding litigation, according to the report, which covers the liability market in a range of business lines.
Increased litigation is one of the reasons for rising rates for senior living and long-term care providers in states like California, Illinois, and Florida, Atkinson said.
“The areas where you have had traditionally large urban environments have been tougher from a plaintiff’s bar perspective,” he explained. “The rings around those areas have expanded into the suburban and exurban areas … What the data shows is this that the severity and frequency of claims in those outer areas is starting to grow.”
As a result of the pressures on rate costs, retentions — or the amount of financial risk that providers are willing to assume — are on the rise as senior living and long-term care providers try to improve profitability. Depending on size, skilled nursing providers may have “more of an appetite for self-insured retention,” Aktinson noted.
Willis Towers Watson has taken a specific focus on fall prevention with its clients, he said. Falls constitute 40% of claims, and about half of the falls associated with claims involved a death, according to a 2018 report from Chicago-based commercial property and casualty insurance company CNA.
As a result, the advisory firm has invested money and resources into a falls management program. This is especially important for senior living providers, as they are not as highly regulated as skilled nursing providers and may not have as strong a focus on clinical issues such as balance and fall prevention, Atkinson said.
But that doesn’t make skilled providers less susceptible to the difficulties the space in general. The strength — or lack thereof — of a facility’s workforce has a major impact on quality, and on risk.
“The skilled nursing world is under tremendous pressure from a payor perspective,” Atkinson noted. “It’s going under an enormous mount of upheaval. Right now the biggest challenge [providers] have is attracting and retaining talent.”
Written by Maggie Flynn