Navigating the 2024 Commercial Insurance Landscape

We are  writing to provide you with a comprehensive update on the current state of the commercial insurance market. The landscape in 2024 presents both challenges and opportunities for assisted living and skilled nursing facilities. This blog breaks down key trends, their impact on your operations, and guidance to navigate the market.

The Current State of the Market

Entering Q3 2024, the property and casualty insurance market for senior living shows mixed trends. Property rates are stabilizing, but challenges like environmental hazards, staffing mandates, and cyber threats persist. With over 16,900 skilled nursing facilities and 30,600 assisted living communities in the U.S., unique risks demand careful attention.

Property Insurance: A Silver Lining

After a challenging 2023, we’re seeing some positive developments in Property Insurance. Rates have stabilized, and increased insurer competition has led to moderate premium hikes and better terms compared to last year. This is welcome news for facility owners who have been grappling with rising insurance costs.

However, it’s important to note that this trend isn’t uniform across all locations. Coastal areas remain problematic due to the heightened risk of natural disasters, particularly hurricanes. The potential for significant hurricane losses could quickly alter these favorable trends, so vigilance is crucial.

A word of caution: Underwriters continue to view senior-care buildings as high-risk properties, especially those constructed with wood frames. These structures are more prone to fire and catastrophic damage, which can impact your premiums and coverage terms.

Hidden Environmental Hazards: A Ticking Time Bomb

Many assisted living and skilled nursing facilities operate in older buildings, often with wood-frame or A-frame constructions. While these structures can be charming and cost-effective, they often conceal environmental hazards that pose significant risks.

During repairs or after storms or pipe bursts, hidden hazards like mold or asbestos may appear. It’s crucial to understand that standard Property Insurance policies typically do not cover these environmental damages.

This is where Environmental Liability Insurance becomes essential. A comprehensive insurance program should include this coverage, along with remediation support and risk management services. For older facilities, Environmental Liability Insurance is essential to reduce long-term liability and protect patient safety.

The Staffing Crisis: Navigating New Mandates and Shortages

One of the most pressing issues facing our sector is the ongoing staffing crisis. Both healthcare providers and insurers are deeply concerned about staffing shortages and high turnover rates. A 2023 poll by Leading Age found 70% of assisted living facilities face severe worker shortages.

This staffing crisis comes at a particularly challenging time. There’s a growing demand for nursing home care, and simultaneously, the government is implementing new mandates to increase staffing levels. In April 2024, the Centers for Medicare & Medicaid Services (CMS) finalized minimum staffing requirements for nursing homes receiving federal funding. Although aimed at improving safety and care, these mandates add complexity to an already strained system.

The American Hospital Association warns these mandates could worsen labor shortages, disrupt care, and even force facility closures in rural areas.

From an insurance perspective, be prepared for underwriters to scrutinize your staffing levels closely. High staff turnover, shortages, and reliance on temporary agencies are red flags that can lead to increased losses and, consequently, higher premiums or more restrictive coverage terms.

Cyber Threats: A Growing Concern

In today’s digital age, assisted living and skilled nursing facilities are prime targets for cybercriminals. The vast amount of medical and financial records you hold makes your facilities particularly attractive to hackers. Despite implementing security protocols like multi-factor authentication, the ingenuity of cyber attackers means that vulnerabilities persist.

The consequences of a cyberattack can be severe, as evidenced by recent events. In February 2024, a cyberattack on Change Healthcare disrupted operations in numerous nursing homes and skilled nursing facilities, causing payment delays and suspensions. Even more alarmingly, Peterson Health Care, one of the largest nursing home operators in the U.S., filed for bankruptcy, citing cyberattacks as a significant contributing factor.

Given these risks, comprehensive Cyber Liability Insurance is no longer optional—it’s a necessity. Look for policies that include support services such as interventionists and negotiators to manage attacks and ransom demands. Additionally, invest in risk management services, including employee education and training programs focused on recognizing potential phishing attacks.

Preparing for Underwriter Scrutiny-  Storify your submission! 

In this challenging market, thorough preparation for underwriter review is crucial. Here are some key steps to take:

1. Document your risk management strategies in detail.
2. Highlight any recent investments in systems or infrastructure improvements.
3. Be prepared to discuss your staffing strategies and how you’re addressing turnover and shortages.
4. Showcase your cybersecurity measures and employee training programs.
5. Consider arranging face-to-face or video meetings with underwriters to build relationships and address concerns directly.

For facilities with challenging loss histories or those located in high-risk coastal areas, it’s essential to work closely with your broker to develop creative plan designs and explore new markets.

Choosing the Right Insurance Partner

Given the complexities of the current market, partnering with a knowledgeable and experienced insurance broker is more important than ever. When selecting a broker, prioritize those who specialize in assisted living and skilled nursing facilities. Evaluate their relationships with leading healthcare insurers, their capabilities in market analytics, and their access to specialized risk management tools and claims advocacy services.

Don’t hesitate to ask potential brokers about their retention rate for healthcare clients and request references. An experienced broker will not only guide you through the underwriting process but also leverage their buying power and relationships to secure the most favorable insurance program for your facility.

Conclusion

While the commercial insurance landscape for senior living facilities in 2024 presents challenges, there are also opportunities for those who are well-prepared and strategically positioned. By understanding the current market trends, addressing key risk areas, and partnering with the right insurance professionals, you can protect your facility, your residents, and your bottom line.