Jonathan Copley, our Head of Care & Social Welfare at McClarrons
Recently, the National Care Association announced that 68% of their survey respondents had reported an increase in their premium, with 35% changing insurance provider. Furthermore, the vast majority (93.5%) said they had no COVID-19 cover in their renewal.
Why are insurance premiums rising in the care sector?
The unfortunate truth is, for the most part, insurers have traditionally struggled to profit from care business, mainly due to the frequency and severity of liability claims.
Covid-19 has stoked the Liability fire; allegations that a person contracts Covid-19 or suffers a related injury due to a breach of the duty of care/negligence by the care provider, is a major concern.
Insurers will no doubt want to defend any potential claim but this may be tricky given Government’s action and advice2:
- Inadequate provision and guidance regarding PPE
- Inadequate provision of testing
- Inadequate provision/distribution of emergency funding
- Inadequate instructions on hospital discharges into care homes
Building a defence to potential claims could be problematic as even if defended, there would be a cost.
We have already seen a report in which a home care worker tragically contracted and died of Covid-19, potentially due to unclear guidance on PPE3.
Reinsurance is also an issue; in its simplest form this is insurance that an insurance company purchases from another to insulate itself from the risk of a major claims event. Effectively, the insurer passes on some part of its own insurance liabilities to the other insurance company. Now, reinsurers are reluctant to take on Public Liability in high risk occupations such as care and hospitality, meaning insurers are themselves having to front the potential cost of all claims.
In addition, some insurers have completely removed Covid-19 or Communicable Disease cover from their Public Liability, whilst others have added what is known as an “inner limit”; this simply stipulates that this amount is the maximum claimable in the policy year. There could be a maximum limit per claim, which is even lower.
How are insurers reacting?
As a result of Covid-19, insurers are now increasing rates to buffer the potential costs of future claims, as well as limit their future liability by excluding or limiting cover – after all, Covid-19 isn’t going anywhere fast.
Insurance is designed to insure what we term as “pure risks”, which involves the possibility of loss. Insurance is not designed to insure “fundamental risks”, which affect the entire economy or population. Examples of fundamental risks in the UK in recent times would be war, terrorism and flood. The insurance market is not, and could not ever be, sufficiently well capitalised to cover risks which affect everybody and at the same time. This is why, when the risk becomes fundamental, there has been a history of Government stepping in.
The NHS has indemnity in respect of treatment provided within an NHS setting and the Covid Act 2020 extends this indemnity for NHS workers working in NHS contracted situations. However, at present, this indemnity has not been extended for the Social Care sector.
There are calls from professionals across the sector, including Professor Martin Green of Care England and Mike Padgham of Independent Care Group, that the Government should now extend the NHS Indemnity scheme to Social Care providers. Given providers are following the instructions of Government, for which some are no longer indemnified, it would seem a necessity.
What should providers be doing?
Now, more than ever, it is important to seek specialist advice on your insurance. As well as Covid-19, there are also “claims made” and “claims occurring” policy wordings to navigate.
It is important to remember that any changes or restrictions to cover will take place from renewal and should not apply to your previous policy year. If you are coming up for renewal, the advice is simple – talk with your broker. If they are specialists, they will be able to advise on these issues, to help you make sense of them and consider your next steps. Consider which insurers they have access to, what is going on in the insurance marketplace and what your different options are.
We would recommend selecting only 1 additional broker to work with due to the complexities within this diluted marketplace and be sure to ask them to cover the above points. Insurance is not a commodity, speaking to specialists is now a necessity.
For any advice, or if you would like a complimentary review of your insurances, you can contact McClarrons at firstname.lastname@example.org or on 01653 600477.
McClarrons are an independent insurance broker with a specialist team who work to support social care providers with bespoke insurance advice and solutions. Their knowledge and expertise made them the perfect choice to provide our readers with some independent insight on the effects Covid-19 is having on insurance.