Continuing worker shortages, the threat of nuclear verdicts in some geographical locations, and the implementation of new technology are all shaping the property/casualty insurance market for senior living facilities.

Challenging areas for coverage can vary by location, experts say, and while new carrier interest and capacity has driven some competition on the liability side, some carriers have completely exited the space. At least one expert believes more carriers may pull back and tighten their appetites as the market cycle continues.

Overview by Line

The senior living market differs by line of coverage and location, Alex Whipple, senior vice president of senior living practice at CAC Specialty, said in an interview with Insurance Journal.

Overall, he characterized the professional liability and general liability markets as still favorable for senior living operators, adding that new capacity has entered the market in the past year and a half.

"But I say that with an asterisk," he added. "There are venues that are very unfavorable. So, the favorability of the market is very dependent on the venue, the geographic location of the communities." California; Cook County, Illinois; Florida; New Mexico and Kentucky, for example, are challenging regardless of market conditions, "but here we are in a fairly favorable market, and those markets are still challenged," Whipple said.

He attributes this to the activity and climate of plaintiff attorneys targeting the segment in these areas. The combination of favorable plaintiff conditions and high amounts of plaintiffs focused on the senior living space make them more challenging to operate.

David Thurber, senior vice president, legal, at CAC Specialty's senior living practice, also listed Colorado, Michigan, Oregon and Washington as challenging states. "We see a lot ... of litigation, and we see a lot of much higher starting points for settlements and ultimately verdicts if we get into a trial," Thurber said. "Those kinds of numbers really do drive ... the rates and the response to the coverage in those particular states."

From a property insurance perspective, Whipple said the market has improved since hardening after Hurricane Ian in 2022, "but I would describe the property market as 'fragile' or 'fickle,'" he added. "It's favorable right now, we're seeing better renewals, we're seeing decreases on renewals, but as soon as we have a bad hurricane season, which is what is predicted, that could all be flipped upside down."

Management liability lines are still in a "relatively soft market," Whipple added, however, auto liability insurance continues to be challenging in the senior living industry and beyond.

According to WTW's report, 2024 Spring Update - Senior living and long-term care, general and professional liability with favorable loss experience and location report rates ranging from flat to increases of 20%. Non-cat exposed property rates changes average from 0% to plus 10% but CAT exposed property increases range from 10% to 20%. WTW reported auto rates for the sector continue to trend up with 7.5% to 17.5% increases on average.

Meanwhile, according to Alera Group's 2024 Property and Casualty Market Outlook that was published in December, underwriters see senior care facilities "as high-risk because many are wood frame construction, prone to fire and other types of catastrophic damage," the report said.

Alera Group reported that most clients "will see rate increases in 2024, with operators in catastrophe-prone areas seeing the most significant increase. Obtaining coverage in coastal communities and areas prone to wildfires will be "extremely difficult," the report said. Still, Alera Group expected property rate increases to moderate barring extraordinary catastrophes in 2024.

Overall, it's a mixed bag when it comes to market conditions that vary across lines of coverage and by geographic location, but there are new carriers interested when it comes to the professional and general liability side for senior living facilities, Whipple said.

Even so, some carriers who previously underwrote senior living facilities have completely exited the space altogether, he said. Those carriers that exited the space were pricing on the lower end of the pricing spectrum, he added.

Whipple expects to see a few more changes in the marketplace in the next year or so. "We are starting to see other carriers that have taken notice," he said, "and we would predict that there are other carriers that might pull back and tighten their appetite based on some of those other carriers who have exited. It's yet to happen, but I would predict that there are a few carriers who might follow suit in the next 12 to 18 months."

In the Northwest, 'There's No Layups'

Michael Ebert, managing partner at Western Pacific Partners Group, explained that in the Northwest U.S., minimal competition and underwriting restrictions are creating a challenging environment. His team continues to see a hard market in the region.

"When we say hard, it doesn't mean just hard in rates," he said. "It means it's hard to find good insurance for the right people."

WPPG has 3,000 clients in the Northwest U.S. and specializes in insuring smaller senior spaces that usually have 12 or fewer beds. Facilities matter more than ever before, Ebert shared, noting that WPPG has seen "several carriers pull out from new business."

He said they are seeing "minimal competition, and the property/casualty rates on this line of business in this area still seem to be in that 25% a year range. It's heavy. And underwriting restrictions are tightening up. It's true. It's difficult."

Property stands out as the most challenging line, Ebert said, adding that property markets "seem to be evaporating," making the surplus lines "a go-to market, which it never was."

WPPG formerly had carriers that would write only property coverage for their clients, "and they're just hands up at this point," he said. As a result, WPPG has had to tap surplus lines more in the past 18 months than all its previous history combined.

"At the end of the day, it's all heavy handed," Ebert said of lines across the board. "It's all difficult right now. There's no layups at all."

Brant Watson, senior vice president and caregiver niche practice leader at California-based Heffernan Insurance Brokers, told Insurance Journal that in tougher venues in and outside of California, most liability coverage is being placed with non-admitted carriers on a claims-made basis. "Even owner/operators that have a good licensure and litigation history are facing renewals where liability deductibles and premiums are under upward pressure," he said.

Lawsuits and Inflation

In many cases, lawsuits against senior living facilities don't necessarily come down to the quality of care received, Whipple said. Instead, it comes down to litigation environments and plaintiff attorney tactics.

Plaintiff lawyers use an emotional playbook that exists within what CAC Specialty's Thurber described as "a new and evolving national culture" toward money, victims and compensation that extends into the court system.

In Washington state, Ebert described the space as "very litigious" and "very sensitive." That makes it even more important for his team members to offer and secure all potential ancillary coverage lines, he said. Documenting when coverage is rejected is key, too.

"It all matters when lawsuits come out," Ebert said. "We've gone through quite a few of them. They look at us with a fine-tooth comb. You better have done all of your due diligence."

Slips and falls drive claims in the senior living industry. Wound care and wound claims are also claim drivers, Thurber said. Ebert also pointed to heatstroke that can lead to death, as well as choking incidents and more that can lead to potential nuclear verdicts.

Carriers are cautious in defending elder abuse cases in court due to nuclear verdict and social inflation influences in the legal system, said Heffernan's Watson. That has led to a rise in mediated settlements, which are becoming more and more common. That can frustrate insureds in claims scenarios where it is felt allegations are frivolous or defensible, Watson added.

Worker Shortage

As the U.S. population ages and the demand for senior living facilities increases, challenges over worker shortages will persist at nursing homes and other care facilities.

The American Health Care Association reported in March that 99% of nursing homes currently have open jobs, including 89% that are actively trying to hire for open registered nurse positions.

Seventy-two percent of nursing homes said their current workforce levels are lower than pre-pandemic staffing levels, and more than half said their workforce situation has stayed the same or gotten worse.

"Our updated State of the Sector Report demonstrates clearly what nursing home providers across the country already know: the ongoing labor shortage is nothing less than a crisis for our sector," Mark Parkinson, president and CEO of AHCA, said in a press release.

The labor shortage challenges will continue as the demand for senior living facilities grows. According to recent U.S. Census data, the number of Americans ages 65 and older is expected to grow from 58 million in 2022 to 82 million by 2050, while the total percentage of the U.S. population 64-and-older is projected to rise from 17% to 23%.

Heffernan's Watson said the senior living facility industry has had challenges in attracting and maintaining staffing levels due to wage level competition from other sectors of the economy and the challenging but rewarding aspects of the caregiving vocation.

From WPPG's perspective, the caregiver shortage is very real, Ebert said. He said that the labor shortage in the sector has not recovered to pre-pandemic levels, adding that all his clients in this sector share that struggle: They can't find enough caregivers, he said.

From an underwriter's perspective, the labor shortage is a concern. "That means folks with inadequate capabilities are employed at these places," Ebert said. "Which creates higher risk across the board."

Claims and Risk Management

When it comes to claims mitigation and working toward reasonable verdicts and settlements, Whipple explained that the team at CAC Specialty works to integrate themselves into the culture of the operators to coach and train them on being as defensible as possible.

"We know operators are going to face litigation. It's not if, but when," he said. "So, preparing them to be as defensible as possible is a strategy that we cannot emphasize enough."

Documentation is the leading issue that drives lawsuits, CAC's Thurber explained, highlighting the importance of documenting in a timely and accurate fashion and responding to issues raised in health care charts. It's also important that a file demonstrates progressive interventions on a regular basis regarding what's being done to mitigate a resident's propensity for falling, developing wounds or elopement.

AI as a Management Resource

Thurber believes artificial intelligence can be an effective risk management resource. It can aid predictability and care of residents by providing real-time alerts to deviations in behavior, he said, enabling staff to respond in a timely manner to changing conditions.

AI can also provide for a "much quicker and a more sophisticated collaborative decision-making process to address resident conditions more efficiently," Thurber added.

Medication analysis done through an AI program, for example, can help senior care staff assess whether a combination of medications is driving certain conditions, or if there's a health risk associated with the combination, according to Thurber. The AI could flag those risks and enable the professionals involved to respond quickly and accurately.

AI-enabled "nurse on a stick" technology allows nurses to enter vitals data immediately and uses artificial intelligence to compare that data to historical vitals data on the resident. It flags significant changes that could require immediate intervention or analysis. This can help health professionals address issues before they become problems, Thurber said.

As nurses enter other health care observations into files, current AI technology can quickly analyze the input against prior inputs and can identify and bring attention to issues to help nurses, doctors and facilities catch and address potential problems before they result in hospital and emergency room visits.

"A couple clients that are already using these kinds of tools are reporting back that it is reducing the number of hospitalizations in their environment," Thurber said. "It's helpful for them to be able to provide better quality care that is more timely and efficient," he said.

"Does it eliminate the issues and claims?" Not completely, Thurber noted. "But it certainly helps mitigate that and provides a more defensible position should the ultimate matter end up in a lawsuit or a claim. We're doing the best we can with what we have, and we're getting more and more of these tools all the time."