Mixed Outlook for Insurance at Assisted Living Facilities

April 3, 2023

As assisted living and skilled nursing facilities emerge from a challenging pandemic, plenty of green shoots exist, but significant challenges remain.

On the positive side of the ledger, the assisted living and skilled nursing industries are seeing improvements in several insurance coverages, including Professional Liability and Worker’s Compensation. Additionally, new tech developments could substantially improve facilities’ abilities to monitor their patients and residents, while there’s a growing sense that critical Cyber Insurance coverage is a growing need but remains manageable.

Other issues, however, are having a more negative impact on the assisted living and skilled nursing industry, including an increase in catastrophic weather events, concerns over occupancy and the industry’s labor issues. Occupancy in skilled nursing and assisted living facilities has shown signs of improvement while still falling short of pre-pandemic levels but is on the right track. Labor hit crisis levels during the pandemic and has yet to rebound.

The Bright Side for 2023

Overall, there’s a feeling of guarded optimism regarding the casualty insurance marketplace, as rate increases are expected to stabilize, and availability appears to be plentiful.

“Insurers are coming back into the market. Carriers’ renewed interest in the sector will increase capacity and constrain rate increases in some lines of business,” notes Alera Group’s 2023 Property and Casualty Market Outlook, a comprehensive examination of the factors behind market conditions and forecast of the P&C landscape.

Professional Liability and General Liability lines of coverage are stable or improving, and we could see opportunity in the coming years to deliver premium reductions in these areas.

Additionally, new technologies are expected to provide more security for assisted living and skilled-nursing patients, likely reducing claims. For instance, new wearables that monitor patient heart rates and GPS devices that track residents’ locations can provide a level of protection that wasn’t previously available.

Cyber a Growing Concern

Technology has proved to be a double-edged sword, however, as Cyber Liability Insurance will be a critical area of coverage within the skilled nursing and assisted living industry. Perhaps no line of coverage has undergone a more rapid evolution. Not long ago, businesses needed to provide little more than a name, address and projected revenue to get a Cyber Liability quote. Now, organizations need to document multifactor authentication, data recovery plans and other legitimate security protocols to get in the door.

The reason for this emphasis on Cyber Insurance is simple: Assisted living and skilled nursing facilities are a prime target for cybercrime, given the amount of medical information they maintain. Additionally, many facilities have dated information systems that can be more easily breached. In the September 2022 article “Common medical devices ripe for cyberattack, LTC prone to security breaches,” McKnights Long-Term Care News reported:

“The healthcare sector is increasingly vulnerable to risk of cyber crime due to unpatched medical devices that run on outdated software and devices without adequate security features, according to a report from the Federal Bureau of Investigation’s cyber division. Medical devices, when in use, have an average of six cybersecurity vulnerabilities, putting users, their systems and patients at risk of attack, including data theft, according to a report from the agency’s cyber division, the report said.

“As of January 2022 53% of connected medical devices and other internet of things (IoT) devices used by hospitals had known critical vulnerabilities, the FBI reported last week. ‘Approximately one third of healthcare IoT devices have an identified critical risk potentially implicating technical operation and functions of medical devices,’ it wrote in a notification to private industry.”

To cite just one example of how widespread the damage from a breach can be, more than 4.2 million people were affected by a 2022 data breach at Independent Living Systems, a vendor of clinical and third-party administrative services to managed care organizations serving elderly and disabled individuals.

This trend is why Alera Group’s Market Outlook called Cyber Liability a “quickly moving, immature market that is expected to become even more challenging in the coming years.”

Troublesome Areas Heading into 2023

This issue, however, pales in comparison to the situation with Property Insurance, which is experiencing its worst market in decades, characterized by large premium increases, dramatic limits, reductions in capacity and skyrocketing deductibles. The impact of Hurricane Ian was so great on the market, in fact, that Alera Group released a supplement to its Market Outlook, the Commercial Property Update, to share insights gained from the January policy renewal period.

The increased frequency and severity of catastrophic weather events is a critical reason for this shift. Several devastating storms over the past few years impacted myriad nursing homes and skilled nurse facilities even before Ian leveled parts of Florida in September 2022. A massive storm that crippled much of Texas in the winter of 2021, for instance, led to nearly half of the state’s nursing homes reporting emergencies, according to a report by the U.S. Senate Committee on Finance and the U.S. Senate Committee on Aging. More than 100 Texas nursing homes lost power, and more than 300 lost access to potable water. Winter Storm Elliott, which affected some two-thirds of the United States in late 2022, also dramatically impacted facilities across the country. A dramatic  rise in wildfires across the western United States also has played a major role in the hardening of the Property Insurance market.

As a result, facilities outside catastrophe-prone (CAT) areas have seen rate increases between 5%-15%, while higher-risk accounts are seeing a rise in rates starting at 25% and up to 150%, as PropertyCasualty360 recently reported in an article featuring Mark Englert, Executive Vice President and Property and Casualty Practice Leader at Alera Group.

Beyond CAT impact

Additional factors that will lead to higher rates for senior living facilities include:

  • Adverse loss histories;

  • Property that is wood-frame construction, older or poorly maintained;

  • Infrastructure that is out of compliance with loss-control recommendations;

  • Carrier requirements for more accurate replacement cost valuations.

Further exacerbating this difficult situation, the gap between reinsurance supply and demand was estimated at $60 billion in early 2023 — three times its figure from the previous fall. Record losses and reductions in available reinsurance mean insurers are cutting back on the coverages they’re willing to offer, and clients are increasingly requiring multiple carriers to reach desired policy limits.

Insurers say that most of their clients’ property values are significantly understated, so insurers are emphasizing the importance of 100% replacement cost valuations. Most are requiring at least a 7.5% increase in values, even if the client was “fully insured” last year.

Staffing issues have also vexed assisted living and skilled nursing facilities, which lost 210,000 jobs during the COVID-19 pandemic, according to a report from the American Health Care Association and National Center for Assisted Living. The number of industry employees dropped from over 1.5 million to 1.3 million, and nursing homes’ staffing levels wouldn’t reach pre-pandemic numbers until 2027 at the current pace.

Moving Forward

As with any situation, the future of the P&C market for senior living facilities is likely to include both good and bad news. “Not all insurers are confident that this sector is in the black yet and will be selective about the accounts they want to write,” as noted in Alera Group’s Market Outlook report.

That said, there are steps facilities can take to improve their position. Facilities without effective risk management programs will have higher rates and fewer options, and they will be asked to assume a greater portion of their risk. In the area of Cyber Liability Insurance, for instance, organizations that pursue strong data security will have a better opportunity to obtain optimal pricing and terms.

In the area of Property Insurance, facility leaders should start the renewal process at least 90 days in advance and be aware of their costs, such as their building’s replacement values. Having updated values will be critical for 2023 property renewals in a complicated market.

To ensure the highest degree of protection, remember that Alera Group includes specialists in long-term care facilities and can offer premium plans in Healthcare Professional LiabilityCyber Liability Insurance captive insurance programs, and more.

With more than 180 offices around the country, Alera Group is able to combine local service with national reach. We can provide individualized, carefully crafted coverage programs that can fit your needs.

To contact an Alera Group agent or broker about insurance for your assisted living or skilled nursing facility, click on the link below.


About the Author

Rob Schumann

Sales Director — Senior Care East

Propel Insurance, An Alera Group Company

With more than 20 years of experience and a focus on senior care, Rob Schumann always finds new ways to help his clients. In high school, Rob worked in a senior care facility and developed a passion for the residents as well as the industry. He enjoys working closely with his clients, building relationships and maintaining long-term trust and reliability. Rob’s goal is to solve problems and accelerate his clients’ success.

Contact information:

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