Even pre-pandemic, there were indicators showing the critical condition the care home sector is in. The cataclysmic impact of coronavirus has compounded and accelerated these melees. There are early signs that the care sector is on the brink of collapse and needs urgent investment.
The rise in insurance costs, coupled with rising expenditure, could inevitably mean a tipping point leading to closures. If these costs continue to increase and we find ourselves dealing with a second wave without any government intervention, there’s no doubt we will be dealing with a national crisis within this sector.
As an insurance broker, we have empathy for the insurance companies; the risk of people suing care homes because of the impact of COVID-19 has led to many insurance providers exiting the market. Insurance firms that continue in the market are increasing premiums for care-related risk to mitigate the threats associated with the virus. In the short-term, there needs to be a plan for the government to give similar remuneration to social care as it currently provides for the National Health.
The post-pandemic future of care homes, from an insurance perspective, looks ominous. If we continue to see huge rises, there will be homes facing closure due to the stringent margins they operate under. Another pressure is the issue of the cover itself; most insurance providers will exclude pandemic-related claims. This exposes care home providers to the risk of legal action from bereft families.
We fully appreciate the predicament that care homes now face. It seems somewhat unfair that the industry is now under huge pressure just to survive. They supported the nation in accepting patients who had tested positive despite the risk and, now, are somehow being punished by being unable to get insurance for their businesses or by being faced with unsustainable premiums.
Many brokers and insurers that are not quoting or looking to quote for any new business for care homes at this moment in time. As an insurance broker in Bolton, cover is becoming harder to source and there will be premium increases. However, most insurers do not give cover for COVID-19 to start with, so they will be the ones that continue to insure homes, albeit at astronomical, inflated costs.
It is our opinion that the post-pandemic objective of these care homes has changed and will continue to change. As hospitals are refusing to take patients who have tested positive, the level of care and services required now falls on the ownership of the care facilities and the cost of extra PPE and other associated costs only intensifies the financial and non-financial pressures.
From an insurance perspective, the future depends on the risk, which is the care home itself, and the exposure to the insurer. Within the insurance industry, we see the fluctuation in markets (and, thus, appetite). We see the dramatic impact that adverse weather has on the nation and the financial burden it carries. The pandemic is no different in that sense; as the cost of claims increases, the insurer appetite changes and, in this instance, withdraws from the market.
Most insurers did not predict the drastic impact of the virus, so there’s no tactical plan for a pandemic or business interruption insurance to accommodate disease-related costs. This has created ambiguity and, with no immediate legal resolution, there is a tentative approach from all insurers, as they direct the efforts to more profitable risks to gap the financial shortfall.
We think there is an evolving gap in the perception that insurers and brokers have of what the modern care home business now looks and feels like. The whole industry is being forced to revolutionise. Once, where they just provided general care for the elderly, it is now expected for them to provide more medical interventions where the hospital refuses to accept the patient. This creates blurred lines of responsibilities and, again, detrimentally impacting the desire and attitude of insurers towards care homes. The fears over the potential exposure, as well as attritional losses associated with liability and ligation claims, makes this industry a hot potato.
Insurers are withdrawing from the market at an increasing rate, temporarily suspending their products or prepared to write care home type risks. Insurers adopt a calculated and educated outlook on risks and industries. They have an outlook so compounded with an inadequate understanding of the long-term impact of the pandemic that they seem to be limiting their exposure. Whilst the core restrictions and omissions generally apply to business interruption, they will overspill into the liability sections also.
Whilst the care home industries have been a source of profitable income, it seems like recovering that brand is a long time coming. We believe insurance companies will turn to other niche areas to redeem their losses. Those insurers that remain in the sector will do so by omitting disease-related covers, changing elements of covers, increasing excess and reducing cover.
The dramatical shift and unprecedented change in this industry have left the market decimated and care home owners scratching their heads. Not only do they need to manage the increased insurance cost, but they also need to manage the cost of PPE and the cost of new medical procedures, which were never the responsibility of care homes before.
We believe the future remains somewhat unclear; prevention is better than cure, so care home insurance is shifting from its traditional roots of providing customers with a product that protects against loss and moving towards a range of services. We see an increase in technology-based preventative services.
Until the government intervenes, the rapid evolution of the care home industry and the agenda that arises will leave both care home owners and insurers facing hurdles. The care home sector needs radical reform. We currently have a blanket approach and insurers look at the CQC audits as part of their underwriting process, and rightly so. If care homes become more segmented and specialised depending on their skills and services, the insurers will respond accordingly.
If we want care homes to be outstanding, then the government should provide them with outstanding support as well. The peripheral and ancillary services and support should also be kind. Whilst there are still insurers prepared to back well-managed care homes, we need action at all levels. However, if we do not see some action, we will find care homes that will not be able to afford the premiums.
If you cannot be insured, you cannot be registered as a registered care service, which means these businesses will cease to exist.
We cannot ignore the fundamental challenges this pandemic has dropped on the ageing population and those who care for them. If this is not a catalyst for change, then we will never see change. The government must listen to the needs of those who represent this industry, and insurers and brokers alike must also respond accordingly as we all have a duty of care towards this sector.
So, we need more than a supportive clap for this business community. The way insurers and government treat this critical fraternity of businesses that care for an ageing demographic should never only be driven just by economical motivations, but also by ethical ones.