News & Events

Insurance Update – Q3 2021

by Simon Bentley, Phoenix Specialist Risk Solutions Ltd

While the last 18 months seem to have passed in the blink of an eye, there are many changes that are being introduced to our lives as the pandemic hopefully draws to a close.

One aspect which many care providers have brought up in recent times is ‘why has my insurance premium increased so dramatically and what can I do about it?

It’s a great question and to start with we need to look back at where we were some 20 years ago. In 2006, when I started working with care providers on their insurance programmes, the average premium spend per home was close to £1,600 and the overall claims experience for my company was circa 62%. So Insurers were reasonable content and equally care businesses felt they were also being treated fairly.

Track forward to 2015 and the average premium has increased marginally to circa £1,750, yet the claims experience has risen to now exceed 100%, in some cases over 200% and the demise of a number of insurers for care businesses, the most recent one being Gable. So insurers were far from content, yet care businesses seem to be blissfully unaware of how the losses were accumulating for insurers.

Then along came the pandemic and insurers claims across all classes moved up yet again, social care reporting a number of potential liability claims for residents who were unable to leave their care home having contracted Covid-19. While there is a reasonable expectation that where a resident had been discharged untested in the first wave (March to May 2020) from an NHS hospital there may be a reasonable defence, this will drop away as the second and subsequent waves happened.

All in all, the expectation insurers have is that where the care sector had been running at over 100% claims costs to premium income, this is now likely to deteriorate still further.

In an attempt to address this cycle of losses, we’ve seen many insurers withdraw from the social care market and those remaining look to impose increased rates and exclude, or substantially reduce, the cover they will provide for the liability risks of any pandemic, including Covid-19.

Onto the next part of the question – ‘what can I do about it?

Understanding where insurers are coming from, should help here. Any good insurer wants to understand the risks any particular client presents to them. So two aspects here, plan with your broker a presentation emphasising the quality of your business – CQC reports are an invaluable tool here and also make sure you allow enough time to negotiate with insurers, so start planning this three months or so before your next renewal.

On average over the last 8 months we have seen claims free business with good or Outstanding CQC reports manage with increases of around 20% on last year, however those who have Requires Improvement CQC ratings or have had claims are seeing increases of over 50%, sometimes 100%.

That’s also where being a member of the Outstanding Society must help. Make sure insurers know you are a member and explain why its beneficial for insurers to work with you as a member of the Outstanding Society. Demonstrate what you do with any claims circumstances which arise. Do you track ‘near misses’ (that’s where something almost went wrong)? If you do, what do you do with this information? Do you share the lessons learned with colleagues and work out how a similar incident could be avoided in the future? If you don’t we’d recommend you do.

Look at alternatives to conventional insurance. Phoenix have never been a broker that follows the conventional and we have been looking at what can be done in the market and have met with several larger care providers to talk to them about developing their own insurance vehicles (Protected Captive Cells) and have also been speaking with another of potential insurers around solutions for smaller providers who don’t meet the £500,000 premium fresh hold to look at a PCC.

One of these conversations has triggered enough interest to mean we may have a new facility available for the care sector in early 2022. This we will keep you advised of as and when it moves to the next stage.

Proudly being the insurance broking partner to the Outstanding Society, if there is anything Phoenix can do to help your cause, please feel free to contact me, Simon Bentley, in the first instance.

I can be reached by e-mail – simon@phoenixsrs.co.uk; phone – 01273 977221

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