A Changing Market
Increased litigation and COVID-19 present new challenges for insurers of senior care facilities.
- David Pilla
- May 2020
COVID-19 will have an impact on insurance coverage for senior care facilities, but the fallout may be mitigated in part by a market that was already hardening before the virus hit as insurers review their approach to these facilities.
With respect to the general and professional liability coverages, insurers and reinsurers are reconsidering their approach to nursing home coverage in light of COVID-19, said Joanne Wankmiller, Boston-based national senior care practice leader with broker Marsh. Several carriers have issued a moratorium on new submissions for the next 60 days and one or two are considering COVID-19 exclusions, she said.
Wankmiller said regulations in some states limit insurance carriers' ability to nonrenew and/or cancel coverage.
“The senior care industry needs protection on a federal level to provide them with tort immunity from the COVID-19 pandemic crisis or insurance coverage for the sector may very well be almost impossible to secure in a post-COVID-19 world,” she said.
A senior facility in Washington state has widely been considered the epicenter of the pandemic. The Life Care Center in Kirkland, Washington had been linked to at least 37 COVID-19 deaths. As of March 30, more than 400 of 15,000 U.S. nursing facilities had an outbreak of coronavirus—among residents, staff or both— according to the Centers for Disease Control and Prevention.
Coverage could change to become more restrictive for senior facilities hit by COVID-19, including sublimits or absolute exclusions for infectious disease including viruses, Wankmiller said in an email. Carriers would apply any changes most likely to all geographies, she said.
John Atkinson, executive vice president and managing director, said Willis Towers Watson is “seeing five or six major carriers actively writing business in this space, and we're seeing a couple of them looking at potential COVID-19 language going forward.”
Some carriers have stopped writing new business for senior care accounts due to COVID-19, said Amanda Fioretti, assistant vice president, AmWINS Program Underwriters Inc. “Several other carriers have developed a communicable disease exclusion and are using this exclusion on a case-by-case basis. A majority of carriers are requiring completion of an infection control application to review coverage.”
“The ability or capacity of any insurer to limit or withdraw coverage in the current environment will be severely restricted,” said Robert Raber, associate director, AM Best Rating Services. “Regulators, legislatures and recently filed legal actions are creating conditions where greater coverage is an expectation.”
Raber said it's likely the specialized coverage forms that writers use going forward will begin to include additional provisions to exclude COVID-19-related losses and/or clarify coverage available in pandemic situations. These changes would most likely be at renewal of the policies.
The effect of COVID-19 on insurance pricing may be hard to define as pricing for senior facilities had already been hardening before the virus hit, said Atkinson. “We've been in the midst of a significantly hardening liability market for senior care and long-term care for the past 18 to 24 months.”
Even before COVID-9 hit, the marketplace for senior care providers was changing quickly, said Wankmiller. “Adverse loss experience from both a frequency and severity perspective as a result of increased litigation across the country and certainly in some states like Kentucky, California, Illinois, New Mexico, Florida and New Jersey, have severely impacted the long-term care and senior living sectors of the industry.”
Wankmiller said insurance carriers were, on average, increasing pricing 10% to 30% “and even more in some difficult venues and for providers with claims activity.”
She said “a few carriers had left the general and professional liability market for senior care providers altogether, restricted coverage, increased deductibles and retentions, and reduced the amount of limit they had historically been willing to provide.”
The market for senior care and the overall health care market were hardening prior to COVID-19, said Fioretti. She said several carriers had pulled out or pulled back and pricing was on the rise due to an increase in litigation costs. Any future changes in insurance pricing due to COVID-19 “will be determined by the emergence of litigation activity,” said Fioretti.