Market Report: 4 Trends Having a Big Impact on the Long-Term Care Insurance Market

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MARKET REPORT

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KEY MARKET TRENDS ON DECK FOR 2020 AND BEYONDThe insurance market for senior living is facing a number of challenges in 2020. The following are key factors contributing to this shrinking market.

An Elevated Risk Environment

In 2019, senior living facilities experienced costly claims situations, and 2020 isn’t looking much different. This can be attributed to specific trends, such as Americans entering senior housing later in life and requiring higher levels of acute care, as well as aggressive personal attorneys pursuing facilities in markets favorable to litigation (e.g., states with loose tort environments). Forecasted annual claim costs nationwide are projected to average $2,300 in 2020 and estimated to increase by 5.0% annually.2 Currently, the state of Massachusetts has the lowest projected claim cost at $520, with West Virginia topping the chart at $8,760.3

Today, there are an estimated six million Americans over the age of 80. By 2040, that number is expected to double to 12 million.1 With the aging population growing, there is an increased need for senior living and/or skilled nursing facilities. But despite the opportunities to serve the senior population, a challenging insurance market is making it difficult for brokers to put long-term care insurance on the books.

This report presents key trends impacting the LTC insurance market and senior living industry as a whole, and reviews how brokers can better navigate the rough waters of selling LTC coverage in a hard sales climate.

2020 PROJECTED LIABILITY COSTS FOR LTC PROVIDERS

» Overall claim frequency: 1.08 claims, annual trend 2.00%*

» Indemnity claim frequency: 0.81 claims, annual trend 2.00%*

» Claim severity estimate: $212,000, annual trend 3.00%

» Loss rate estimate: $2,300, annual trend 5.00%**

*Number of claims per 100 occupied beds.**Liability costs per occupied bed.

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Increased Premiums The senior living industry is experiencing a steady increase in premiums and rates on everything from professional and general liability to property and commercial auto. According to Insurance Journal, even accounts with no loss history are seeing premium increases at a minimum of 12% to 15%. In fact, it is projected that over the next 12 to 24 months, insurance costs for assisted living facilities could very well double or even triple.4

Fewer Carriers As more carriers consolidate to remain profitable, the insurance market for senior living operations is shrinking. Not only is this leaving facilities with fewer options, but the carriers that remain are reducing their risk capacity by restricting coverages and limits while increasing premiums. Tighter UnderwritingIn a hard market, it’s not unusual for carriers to err on the cautious side by imposing stricter underwriting criteria. This can mean challenges for both renewals and new business, especially for submissions with a less-than-favorable claims history.

STRATEGIES TO IMPROVE LTC SALES PERFORMANCE » Be prepared to work harder for every account. This

means remarketing, comparing coverages, preparing proposals and developing alternatives to assist clients in their buying decisions.

» Be proactive and get full underwriting submissions in front of underwriters early. The optimal time for a successful submission of a risk in a hard market is 120 to 150 days ahead of the coverage period for new submissions and 90 days for renewals.

» When submitting business where there has been significant claims activity, don’t rely on loss runs alone to tell the story. If necessary, explain certain claims situations when submitting an application so the under-writer or carrier can better understand the issue and won’t automatically decline the submission.

» Partner with a broker who knows the senior living industry and can identify potential risks to help your clients minimize their claims exposure with strategic programs and best practices.

» Establish a renewal process that identifies in advance specific markets to approach and alternatives if a submission is declined or if terms are unacceptable.

» Contact your underwriter ahead of time to determine if any specialty or supplemental coverage forms, question-naires or applicants are required.

» Work with a wholesaler who has access to a wide range of senior living markets and long-standing relationships with top industry carriers.

» Explore premium finance options in advance — especially for large accounts.

» Review reserves on all open claims with the adjuster to ensure accuracy.

“As more carriers consolidate to remain profitable, the insurance market for senior living operations is shrinking. Not only is this leaving facilities with fewer options, but the carriers that remain are reducing their risk capacity by restricting coverages and limits while increasing premiums.”

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CONCLUSIONAll indications for 2020 point to a challenging senior living insurance market that will continue to pose issues for brokers in building and retaining their LTC insurance book of business. To ensure the best possible options and terms for clients, your best line of defense is to submit complete and detailed submissions early and to work with a wholesaler who has industry expertise and market access to a wide range of senior living carriers.

Worldwide Insurance Facilities has unprecedented access to a wide range of senior living markets and has built solid relationships with virtually every specialty insurer on the market. The strength of our brand positions us to serve our retail insurance brokers and offer coverage for small and large senior living accounts.

NOTES1. Insurance Journal, January 6, 2020.

2. 2019 Aon Professional and General Liability Benchmark for Long Term Care Providers Actuarial Analysis. Loss rate is the annual amount per occupied bed required to defend, settle and / or litigate claims in any given calendar year.

3. Ibid.

4. Insurance Journal, January 6, 2020.

JORDAN CONNELLYSenior Vice President / Branch Manager(678) 502-1260jconnelly@wwfi.com

MAIRE KAHLEYSenior Associate Broker(678) 533-1434mkahley@wwfi.com

KRISTIN DANIELSSenior Associate Broker(678) 502-1274kdaniels@wwfi.com

ANGELA DAVISBroker(678) 502-1012adavis@wwfi.com

BRAD BENEFIELDTechnical Assistant(678) 533-1433bbenefield@wwfi.com

ABOUT WORLDWIDE FACILITIESEstablished in 1970, Worldwide Facilities is a national

wholesale insurance broker, managing general agent, and

program underwriter. Our team of insurance specialists has

access to virtually every specialty domestic and international

insurance market.

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