Care home insurance – can risk management halt the rising cost?

Concern over the management of care homes in the UK is a topical and sensitive issue. Mismanagement of care homes has now begun to take precedence over the sector’s widely publicised financial difficulties.

The insurance market has been extremely buoyant over the last few years and care has been one of the principle sectors to benefit from increased market capacity, increased competition and consequentially, reduced insurance costs

This is about to change. In certain areas of care, residential care in particular, we are witnessing an average rise in premiums of around 15% per annum. Significantly higher increases, in some cases over 100%, are being seen for the first time in many years and D E Ford believes that this is set to continue.

Chris outlines the reasons for this;

Claims Inflation

The whole insurance market is significantly affected by an increased cost of claims. In the last few years, this is having a knock on effect on premiums.

A recent study into personal injury claims anticipated that claims costs are scheduled to increase by between 9-10%. In addition, the Association of British Insurers suggests that there has been an increase in the number of fraudulent claims, also in the order of 9-10%.

Abuse & Neglect

These claims can be significant in the amounts awarded, but the legal costs can also be considerable. When discussing abuse and neglect, insurers, in the last few years, have been concerned with historic acts of abuse. Many of the claims made date back several years and the awards that are now being made far outweigh the premiums being collected. Given the nature of residential care i.e. the age profile, this is not so much of an issue, however other areas of care, for example LD and YPD, have experienced many historic liability claims.

Chris Greenall

Chris Greenall, Director of D E Ford Insurance Brokers Ltd

More recently, high profile incidents such as those seen at Winterbourne View in Bristol and Ash Court in London, and the associated media attention, has renewed public awareness of this whole issue. One of the leading insurers in the care market has recently reported a tenfold increase in the number of alleged, abuse, neglect or “failure to provide care” claims.

Frequency of Claims

General claims frequency is also on the increase. The stimulus for this being recession and a lack of loyalty to the employer. These are major factors in the propensity to claim, along with low pay and the mobility of labour.

The cumulative effect of the above will undoubtably affect the insurance market, and in some cases, has already influenced the market as insurers pull out of the sector and there is more pressure on the remaining providers to increase premiums.

The Possible Remedy

How can we stop premiums increasing or at the very least minimise increases?

The most important thing is to understand and address the risks within services. Operators can achieve this by implementing an effective risk management programme, and having a robust health and safety regime in place. Care home operators, insurance companies, and financial institutions are going to need to communicate effectively to create transparency around processes that minimise the degree of risk within the service.

Risk management processes are critical to the future of the industry. Whilst risk management is already considered essential to the proper care of clients, it will become imperative that these measures are comprehensively and transparently communicated to insurers so that they can better understand the businesses risk profile and manage premiums. This may mean sharing information with insurers, as far as the Data Protection Act will allow, to evidence that a robust and structured approach to quality and risk management is in place.

About D E Ford

D E Ford Insurance Brokers Ltd is a York based, independent Insurance Broker with over 30 years experience in the care home sector, insuring care homes throughout the UK.