Virus Exclusions, Rising Rates and Renewal Difficulties Continue for SNF Insurance Policies

Skilled nursing facilities continue to be plagued by insurance issues more than a year into the pandemic, with more and more carriers pulling out of the sector or attaching COVID-related exclusions to policies.

Chicago-based risk management, insurance brokerage and advisory firm Willis Towers Watson in a November report said the COVID impact exacerbated existing problems too, deepening rate increases, capacity shortages and coverage entrenchments.

“There were some significant underlying litigation trends that have been impacting the industry prior to the pandemic hitting, and we were in the midst of what was a rapidly hardening insurance marketplace,” said John Atkinson, managing director for senior living and long-term care centers of excellence at the firm, in an interview with Skilled Nursing News. “The tide was really rising before COVID hit.”

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Rate increases will continue well into this year, the report said — carriers are pulling out of the space, and those left aren’t creating competitive prices.

SNFs attempting to renew their policy or get a new one will be hard pressed to find one that includes protection against COVID-19, much less communicable diseases like noroviruses commonly found in nursing homes.

Carriers are excluding such protection from policies in order to curb an expected increase in claim submissions. Atkinson looked to terrorism coverage post-9/11 as an indicator of what might happen next.

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“After the 9/11 attack, there were universal terrorism exclusions that started coming onto policies, and then the response to that was, carriers were creating specific facilities to provide terrorism coverage that they could underwrite, understand what the risk is, and then try to charge an appropriate premium,” he added.

The Terrorism Reinsurance Act in 2002 created a program to ensure a transparent system was in place for businesses to obtain such insurance.

“We’ve seen a couple of providers start talking about this and there’s another solution called a parametric [insurance] trigger which is very nuanced. If certain events happen, then this coverage would provide indemnity to the insured and so you can get some coverage through that,” added Atkinson.

Parametric insurance offers a payout based on an objective measure of some big event, rather than damage sustained. The trigger refers to conditions which determine the payout. U.K-based Beazley Group offers parametric insurance for the pandemic, Atkinson said.

Renewals have been and will continue to be priced considerably higher for what Atkinson calls “hot button states,” where the litigation environment is more frequent than other states, naming California, Florida, Illinois, New York and Kentucky among them.

“The plaintiffs bar has been focused on these being potential claims to bring, but a lot of them, based on intel that we have, are kind of waiting to see the immunity efforts, liability protection efforts … if they’re going to stick. They’re waiting to bring those claims,” said Tara Clayton, senior claim consultant at Willis Towers Watson. Clayton refers to litigation related to carrier exclusions.

Timelines for renewals are longer too, the report said, with carriers overwhelmed by new business coupled with reduced underwriting authority, and playing wait-and-see in the face of an evolving health crisis.

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