Confronting Skyrocketing Liability Insurance Costs for Senior Living
ABOUT US About Us
Tara Clayton Senior Claims Consultant Willis Towers Watson
Scott Wallace Managing Partner and Client Advocate Willis Towers Watson
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Overview Discussion of the Macro Impact of COVID-19 on the P&C Industry Senior Living Market Update Solutions and Strategies to Navigate the Current Marketplace
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Macro Impact of COVID-19 on the P&C Industry The difficult news… COVID-19 will be the largest single catastrophe to impact the P&C Industry even WITHOUT legislative or judicial “curveballs” Industry analysts estimate losses in excess of $100 billion
Why? It’s impacting multiple lines of insurance across all global geographies: Property and Business Interruption Event Cancellation, Travel, Trade Credit
Coverage litigation expense may be significant. Property coverage outside of US has more instances of ambiguity Will this be a “long tail” insurance event? 4
Macro Impact of COVID-19 on the P&C Industry (cont'd) The Current P&C Market Reaction… For most lines of P&C, we are seeing a continuation of the hard market conditions for large insureds that existed before COVID-19 without acceleration except:
Senior Care GLPL deterioration has continued D&O and EPL rates and capacity are under severe pressure, especially for hard-hit sectors Cyber Liability rates increasing and coverage retracting due to rise in ransomware attacks and increase in work from home for most companies Property coverage terms are under significant scrutiny COVID-19, Communicable Disease, and similar exclusions are appearing on renewals Reinsurance Treaty renewals expected to tighten language and impose relevant exclusions which will likely increase the discipline of insurance underwriters regarding coverage Workers Compensation’s years-long stability may be undermined by the expected success of presumptive legislation Impact of COVID-19 on Liability lines (e.g., GL, EL, etc.) still a question mark, but Umbrella and Excess Liability rates and capacity are under increasingly severe pressure due largely to previously underlying conditions 5
Senior Living Market Update – GLPL and Excess Spotlight on COVID-19
Carrier executive leadership, boards of director are intensely focused on aging services sector due to pandemic impact and headline exposure COVID-19 impact on this already challenged insurance marketplace is uncertain, however carriers are taking drastic action Further deterioration of impacted coverage lines is expected as claims and losses develop Carriers focusing on operator infection control processes, and emergency preparedness Communicable Disease exclusions are entering marketplace Carriers limiting batch reporting language Several major carriers have left marketplace completely Carrier education on AL and client differentiation is important Underwriters carefully monitoring tort reform issues
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Senior Living Market Update – GLPL and Excess (Cont'd) Hardening GLPL Market Accelerates Post COVID-19
The frequency of high severity claims and their negative impact on loss ratios continue
The number of claims over $1,000,000 has increased dramatically over the last 3 accident years (2017-2019). All carriers reporting very troubling severity claims with frequency of large losses in tough venues
Carriers and self-insureds are experiencing significant increases in frequency and severity especially in troubled venues CA, FL, KY, TN, OK, NM, NY, and IL
Social inflation driving up liability verdicts and settlements Increase in the frequency of punitive damage awards
Plaintiffs' bar is very active and creative as it pursues this growing industry with both single plaintiff and class action litigation strategies
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Senior Living Market Update – GLPL and Excess (cont'd) Insurers are adjusting the structure, coverage, and pricing of most towers of insurance Rates are expected to keep rising into 2021 Primary: 15 to 40%+ depending on loss experience and venue Excess: 50%+
To mitigate large premium increases, many insureds are: Assuming higher retentions Reducing excess limits purchased
The trends toward coverage retrenchment continues Class action, punitive damages, and sub-limits for abuse are increasingly being introduced Most insurers are mandating the addition of COVID-19, pandemic, or communicable disease exclusions on renewals and new business 8
Property Update Capacity is shrinking, especially in catastrophe-prone areas Insurers have less appetite for single carrier towers; consequently, insureds are increasingly exploring shared and layered programs in order to access adequate capacity Deductibles and retentions are increasing to eliminate attritional loss dollar swapping and, in some cases, to help mitigate large premium increases Business interruption values need to be reevaluated at the time of renewal 9
Commercial Automobile There are few, if any, monoline auto markets with an appetite for long-term care Clients are exploring package solutions that combine auto liability with workers' compensation on property insurance to leverage capacity COVID-19 has parked many insured vehicles for extended periods without premium relief While miles drive are down, loss severity continues to increase from distracted driving 10
Workers' Compensation Many insurers have imposed a moratorium on new health care business With less choice in the marketplace, troubled programs are vulnerable to large rate increases and increased deductible aggregates As associates in the senior care industry often have acute exposure to COVID-19, insurers are scrutinizing risk management protocols Many positive COVID-19 cases are attributed to associates' workplaces regardless of where they may have contracted the disease 11
Factors Impacting Renewals Timing Constraints Underwriting Guidelines
• Underwriters are overwhelmed with subsmission activity • Even initial quotes are coming down to the wire • Tough to obtain multiple options as bandwidth is low • Constant change in guidelines and rate expectations • Approval shift to senior management, not underwriters • Focus on overall performance and addressing volatility
Available Capacity
• Increased volume allows underwriters to be more selective • Less capacity for large limit / adverse loss deals • Capacity is being priced and deployed conservatively
Challenged locations
• Micro-hard market seeing +50%, +100% even +300% • CAT exposed and loss driven accounts seeing > +30% • Heavy scrutiny on engineering and open recommendations
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Strategies To obtain appropriate premium rating buyers must ensure submitted exposures are accurate and reflect changes caused by COVID-19 Renewal timelines are substantially longer due to the convergence of three main forces: The disrupted marketplace has led to a large spike in the volume of new business submissions into carriers Underwriting authority in the field has been reduced, often necessitating more robust and time-consuming referral processes Closely monitoring the continuously evolving COVID-19 situation, many insurers are only issuing quotes within 30 days of renewal
Infection control will be front and center when addressing operational and clinical loss prevention measures Virtual underwriting meetings should be leveraged with select markets to differentiate your organization Utilization of industry specific benchmarking and analytics are critical to defining success at renewal 13
General / Professional Liability Primary Policy Benchmarking
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ABOUT US Audience
Q&A
Tara Clayton Senior Claims Consultant Willis Towers Watson Tara.Clayton@willistowerswatson.com
Scott Wallace Managing Partner and Client Advocate Willis Towers Watson Scott.Wallace@willistowerswatson.com
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