The current insurance market is an oligopoly. There are many buyers i.e. care providers and the number is growing but there are few sellers on the insurers’ side.
During the past year there have been a number of withdrawals from the care insurance market, most notably Ecclesiastical and Ansvar, as well as the collapse of a scheme with Milburn. In this case it was alleged the insurer was not authorised to transact business in the UK.
Industry sources suggest that Ecclesiastical Insurance controlled about £30m worth of premiums across the care sector. As Ecclesiastical has continued to struggle, some have suggested that perhaps the correctly-priced value for their business was more in the region of £45m. This is a sizeable piece of the market for care insurance.
The withdrawal of Ecclesiastical and Ansvar has created a supply problem in the insurance industry. Insurers have a limit on how much business they can or are prepared to write in the care sector and most insurers are frankly not looking to write more care business than they have at present. Insurers are also becoming more choosey about what risks they will take on. We have heard that some insurers will not look at cases where there have been any Inspection issues in the past 12 months. Others are setting higher standards for a home’s management team than in the past. Homes with a bad claims history are finding it very hard indeed to even get cover.
Until recently a well run claims-free care business may have been given discounts of around 60% off book rates. Today discounts have been reduced to 25-30%. This coupled with general rate increases means that insurance premiums for carers could double compared to last year.
If you are a care business what can be done? The most important point is to make sure that you begin the insurance renewal process in good time. The needs of care homes are complex and a lot of detail must be considered. Ideally you should be starting discussions with your insurance provider 2 or 3 months before renewal date. The risk of leaving it late is you may be forced to pay whatever your insurer proposes as the new premium without time to negotiate.
There are some insurers out there who are very cheap. This causes concerns because cover may not be good or they might not be collecting sufficient premiums to pay claims, or they may not be investing sufficiently in their own infrastructure, meaning that service levels may be poor. Insurance is very much like care. You want to provide good quality care, but it doesn’t come cheaply. Neither does good quality insurance!
On examination of liability claims within the care insurance market, there is a clear correlation between homes with poor quality managers/temporary managers/no managers and costly liability claims. You might think employing a great manager is costly, but it’s not as costly, in the long term, as having poor management.