Understanding What Goes Into Insurance Rates for Your Elder Care Facility
As an agent, your clients may be asking about their insurance rates: “Why did my insurance premium go up? , or “Since I have never had a loss, why didn’t my insurance rates go down this year?” Insurance rates, for the most part, have gone up anywhere from 6% to 15%. There are a number of reasons for this increase.
A “Hard” Market
After about five to six years of a “soft” market, we are starting to see the market turn “hard”. Mortgage rates and government bond rates have hardly ever been as low as they have been for the past few years. Previously, when government rates were in the five to seven percent range, insurance companies were able to offset the claims they were paying out by parking a percentage of their premiums in these bonds, which in turn, helped keep rates low. Now, with government bonds yielding barely one percent, insurance companies no longer has that cushion to help with insurance claims.
Insurance is a Shared Risk
Even if an elder care facility has a spotless record, they share the insurance world with clients who have claims, some very large. When an elder care facility’s premiums go up, they may be tempted to lower their limits, alter or delete coverage, or raise their deductible. They become convinced that, since they have not had to use their coverage, they never will. We cannot predict the future. Elder care facilities need to have coverage sufficient to meet unexpected areas of risk.
Whenever a natural disaster occurs, it affects insurance premiums. Fires out west, tornadoes in the central United States, and hurricanes in the south all mean that insurers pay out huge sums. Damage on the Jersey Shore and the surrounding areas could have a final tally of up to $5 billion. Oklahoma tornado damage could exceed $3 billion. Many other natural disasters have happened over the past few years, resulting in large sums paid out by carriers. Remember that insurance is a shared risk.
Risks Specifically Associated with Elder Care Facilities
There are some risks unique to elder care, such as medical mistakes (mistakes in medication delivery), injury and accidents, and issues of facility management. Any adverse event, which interferes with delivery of care, can result in litigation. Coverage must sufficient to cover these unique risks.
Other areas of consideration that may affect insurance premiums are:
- Where You Conduct Business – the location of your facility
- Years of Experience – how long the facility has been in operation
- Previous Insurance History – any previous claims
Frequently, elder care facilities either get a flyer or receive a phone call promising lower insurance rates. Of course, you know that few of these promises are reliable. However, these offers precipitate questions concerning a client’s current rates. At Highland Risk Services, we are always ready to answer questions about current coverage and review the reasons for the rates charged elder care facilities. Please contact us with coverage questions at one of our offices in Chicago at 847-832-9100 , Lansing at 517-676-7100 or Phoenix at 847-832-9099.