Insurance Marketplace Realities 2019 — Senior living and long-term care

November 6, 2018

Rate prediction

  Trend Range
Senior living and long-term care Increase +5 to +30%

Key takeaway

The senior living and long-term care insurance marketplace remains in stark contrast to the overall health care industry, with less favorable conditions for buyers due, in part, to rising frequency and severity of claims.

Continued pressure on profitability is driving a hardening marketplace with greater volatility, underwriting scrutiny and a focus on hot-spot venues.

  • A back-to-basics approach continues to drive a heightened requirement for more detailed submissions, face-to-face meetings with underwriters, thorough supplemental information, clinical and data risk analytics and longer lead times to obtain quotations.
  • Carriers continue to scrutinize this sector and several key markets have exited the space in the past 12 months. Most recently, several Lloyd’s syndicates withdrew from the marketplace completely.
  • Fewer carriers than ever are offering occurrence-based forms.
  • Retentions (deductible or self-insured retentions) are also on the rise in efforts to improve profitability.
  • However, we see new capacity entering the space and proving competitive on selective accounts.
  • Merger and acquisition activity among carriers has had little impact on this sector to date.

Several factors are creating emerging risks in the sector.

  • Class-action lawsuits focused on anti-consumer, staffing, marketing and ADA violations could be coming in more states.
  • Expanded litigation beyond urban areas is affecting results in suburban and exurban venues more dramatically.
  • Natural disasters, including wildfires, catastrophic storms and flooding, are drawing underwriter attention to disaster preparedness.
  • Although occupancy challenges have dampened M&A in the sector, significant activity persists and a focus on due diligence, vetting policies and procedures, and mitigating turnover is critical to making sure the combinations will succeed. Underwriters will still focus on pre-acquisition loss history on assets that are in play.

Increasing claim frequency and severity trends, identified in actuarial and industry data, are putting pressure on carrier loss ratios, driving rate, pushing increased retentions and adding scrutiny to the overall underwriting process.

  • Recent studies indicate assisted living and memory care communities are averaging higher severity losses than those in skilled nursing facilities. Buyers will need to keep a keen eye on verdicts, settlements, class action matters and the evolution of tort conditions in various venues.
  • Carriers are focusing more on management of falls, memory care and prescription drugs.
  • Carriers have begun to restrict coverage grants, such as most favorable venue endorsements for punitive damages and are adding coverage triggers that allow defense costs to erode primary limits of insurance.
  • Several states are seeing significant rate increases, including California, Illinois (Cook and the collar counties) and Florida.
  • Natural disaster losses are negatively impacting property pricing and coverage grants.
  • Auto and cyber lines of business are also under pressure due to adverse experience.
  • Expect terms and conditions to come under increasing scrutiny from carriers in high focus areas.