Whether you’re in the senior housing, assisted living or nursing home business, you’ve no doubt seen what’s known as a “hardening” in the insurance market lately.
Premiums, in other words, have been climbing.
No one likes when this happens, but after years of stability and even declines in premiums, the pendulum has definitely swung back.
Healthcare industry businesses with more than a handful of claims are easily seeing 50% to 75% rate increases at renewal.
Claims, of course, are exactly what’s driving rising insurance rates, some related to a wave of class-action lawsuits. Another factor in all this: a spike in memory-care beds, which insurers view as a decidedly riskier risk than, say, an independent living facility.
In response, several carriers have left the market altogether, others have consolidated, while those still in the market are only entertaining applicants with no claim history.
We’ve talked here before about risk mitigation steps that a healthcare business can take to reduce its risk, items that include better employee training and fall prevention. But there are a few other ways a healthcare facility can try to keep rising insurance rates in check. To wit:
Higher retentions. A retention is the portion of your loss that you pay. The higher your retention, the lower your premium might go. A higher retention shows that you’ve got skin in the game. It assures the carrier that you’re going to do all you can to keep claims to a minimum, because, after all, each claim will end up costing you more.
Eliminating aggregate deductibles. An aggregate deductible places a cap on how much a policyholder would be required to pay on claims over the course of a year. For example, a nursing home is notified that its food made residents sick. The company’s per occurrence deductible is $10,000, but it also has an aggregate deductible in place that says it does not have to pay more than $100,000 in deductibles in a given year. Assume it’s hit with 20 claims, each of which is settled for $20,000. Without an aggregate deductible, the company would be responsible for half of each claim, and would ultimately have to pay out $200,000. The aggregate deductible, however, limits the home’s total deductible to $100,000. Eliminating the aggregate deductible leaves it with a bigger bill but means the carrier’s risk is limited. End result? A possibly lower premium.
Accepting sublimits for higher exposures. A sublimit places a maximum on the amount an insurer will pay for specific types of losses. Sublimits are usually a percentage of an aggregate limit of coverage under a policy. For example, under a commercial property policy with a $2 million limit applicable to loss from all other causes, there may be a $100,000 sublimit on coverage for losses arising in a flood. In short, the sublimit is the most an insured can collect for the type of loss to which the sublimit applies.
There’s a bigger roll of the dice involved in all of the above, of course, and, like most things about the insurance world, can be more than complicated. Don’t hesitate to reach out with your questions about how you can better tackle rising insurance rates.
Jeff Parent is a CCIG Insurance Advisor. Reach him at Jeff.Parent@thinkccig.com or at 720-330-7918.
CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.
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