2014 will be a watershed year for care home owners in which the winners and losers will be defined by their approach to mitigating risk and ensuring financial stability. After enjoying a decade of low and declining insurance premiums in the care sector, the market is hardening as insurers seek to lessen their exposure to risk after an explosion in the number of claims. Care home owners will increasingly be assessed on an individual basis, making it imperative for them to implement rigorous risk management policies.
In the past there was always another cheaper insurer round the corner, which meant that care home owners did not feel financial pressure to worry about how many claims they made. That trend is now changing; insurers will look closely at care home owners’ historical claims, their management processes and costs.
Care home owners seeking to ensure they are appropriately covered and secure lower premiums must be aware that insurers scrutinise their risk management programmes intensely. This will include an assessment of how they:
- manage and minimise the risks they face, such as those relating to staff, residents and visitors
- review aspects of these risks and how regularly this is done
- develop risk management programmes following claims that occur
- implement staff training programmes
2014 will see some care businesses, predominantly care homes, unable to secure insurance. This is because they have incurred claims and not made changes to their business and risk management processes in order to reduce the risk of future such claims occurring again. Careful and regular analysis of management processes will bring significant financial returns to care home operators.
A care home owner with five care homes approached Care Home Insurance Services (CHIS) for an insurance quotation.
The last five years of the owner’s claims records showed at least three employer’s liability claims a year, occasional material damage and a resident/visitor injury on five occasions, equivalent to once a year. These claims cost insurance companies almost £400,000 over the five years, equating £80,000 each year or £16,000 per home per annum.
In addition, the owner could not demonstrate she had an effective risk management programme in place.
A business with little to no risk management, incurring claims costs of £80,000 annually over the past five years, will probably incur claims costs of £90,000+ for the coming year.
The non-claims costs, such as broker’s commission, reinsurance, legal expenses, administration costs and contingency for storms and floods add an additional 35%, equating to a premium of £135,000.
The owner could not believe her ears as her premium for all five homes over the last five years did not exceed £20,000 a year. Insurers lost over £60,000 each year!
What has changed is that insurers will no longer allow such situations to exist. This care home owner will fail to secure insurance cover for her business unless she adopts a proactive approach to risk management.
When it comes to risk management there are specific areas where Care Home Insurance Services (CHIS) can help, including:
- Health and safety: We have a risk assessment and document storage service, as well as a qualified risk manager who can visit to assist and train care home staff in areas of risk management.
- Regulatory risk management: After CQC asked a came home to hand in its registration voluntarily, we teamed up with ProActive risk consultancy, which can assist in securing regulatory compliant standards and evidencing the work care homes do.
- Clinical risk management: We employ Dr Nicola Gainsborough, a consultant physician specialising in geriatrics and strokes.
The current situation is untenable and the industry will welcome this return to sanity. Care home owners must take responsibility for managing and minimising risks to their businesses. Good, risk conscious care homes, which implement and continually review risk management programmes, will be rewarded. Those that do not will struggle to find insurance cover.
David Waters, MD, Care Home Insurance Services (CHIS).
For more information visit www.care-home-insurance.co.uk