5 Reasons the Senior Living Insurance Market is Hardening and How to Help Your Clients

Long-term care facility operators are about to face some changes in the insurance marketplace. After a prolonged period of competition and relatively low rates, insurers are beginning to raise rates and becoming more selective about the facilities they write. Retail agents and brokers can help their senior living facility customers through these changing conditions in several ways, as discussed below.


Economic shifts as well as greater financial losses are taking a toll on the insurance markets. A variety of factors are combining to make business more challenging for long-term care facilities. Among these are:

High staff turnover. Long-term health care has historically struggled to retain employees, especially registered nurses and certified nursing assistants. Continuing expenses in recruiting, training and compensating staff are eroding profitability for facility operators and making it more difficult to deliver a consistent quality of care. In this scenario, liability claims are more likely.

Reduced occupancy. Seniors are living longer, more of them are ambulatory and, depending on demographics, many prefer to receive home-based care. These trends are reducing occupancy rates and residency in all types of facilities — independent living, assisted living and skilled-nursing facilities. With reduced occupancy comes lower Medicare reimbursement as well as private-pay revenue, so senior living operators are struggling to contain their costs. As insurers begin to raise rates, operators will face the unpleasant reality of paying more for insurance than they did before.

Mergers, acquisitions and dispositions. As the population ages, growth opportunities in long-term care continue to drive mergers and acquisitions, and investor activity is driving the sale of underperforming locations. Due to staffing needs and other business factors, it can take a facility 18 to 24 months to turn around its financial results under a new owner. During that time, the facility’s loss experience might continue to suffer.

Lenders’ insurance requirements. Senior living facility operators continue to find lenders eager to provide working capital, but more lenders are ratcheting up their insurance requirements. Already highly leveraged, facility operators are now seeing lenders insist on high limits for single locations, which runs counter to insurers’ appetites and the capacity they’re willing to deploy. Not only are long-term care operators about to pay more for coverage, but their lenders also are asking them to buy additional limits.


In addition to the above trends, insurers themselves are seeing inflation in long-term care claim costs. Many of the types of claims common in long-term care settings remain the same, but the cost of each claim has been growing over time. According to the 2016 Claim Report published by CNA Aging Services, the most recent such study of claims in long-term care facilities, claim frequency across different types of facilities has been stable to slightly up during 2014 and 2015. Severity remains high. CNA found that the average total claim payment for an assisted living facility claim in 2015 was $221,496, compared with $212,766 for a skilled-nursing facility and $123,825 for an independent living facility.

Among the reasons for higher claim costs are plaintiff-friendly legal venues across the nation and increasing timeframes to resolve claims. In general, the longer a claim remains unsettled, the more it costs. Large awards and settlements of lawsuits alleging negligent care and wrongful death of seniors in long-term care facilities are common in these venues, most of which do not have laws capping damages. Examples of such awards include:

Other difficult venues include: Arizona; California; Cook County, Illinois; New Jersey; New Mexico; New York; and West Virginia.

Longer claim closure times are another factor prompting insurers to increase long-term care rates. According to the 2017 Long Term Care Benchmarking Report by Aon Global Risk Consulting, the average time to close a long-term care claim through arbitration in 2017 was 46.7 months, vs. 47.8 months for claims that were not arbitrated. In 2016, arbitrated claims took an average of 37.6 months to close, while non-arbitrated claims took 35.5 months.


Retail agents and brokers have an important role to play in any market hardening. They are closest to their customers and in a strong position to understand and communicate the details of each account’s risk management program and loss experience. As the insurance marketplace hardens for facility operators, retailers can help their customers by:

Setting and managing expectations. Senior living facility operators need to understand that rates will go up when they renew their coverage. Years of competition and new capacity in the senior living sector have not aligned rates with the risks, so the market hardening is a correction of prolonged underpricing. By communicating this to their customers, retailers can set realistic expectations.

Proposing cost-effective restructuring of insurance programs. Retailers can provide great value for their customers by reviewing each account’s limits and retentions. Accounts that previously had nearly first-dollar coverage can benefit from retaining more risk. Even with higher retentions and deductibles, facility operators could face rate increases. Sharing risk with insurers sends a strong signal that a facility is serious about mitigating its loss exposure.

Promoting consistent buying behavior. Insurers often are willing to reward accounts that remain loyal, rather than shopping every renewal for the lowest price. Longer-term relationships generally are better business for facility operators and insurers. Ultimately, the customer is in the driver’s seat and is free to seek the lowest rates. But value in insurance is not solely about price. Retailers should advise their customers on the advantages of sticking with committed insurers that take the time to understand and serve policyholder’s unique needs.


Ensure you’re partnering with the right wholesale specialist who can provide insights and deliver creative insurance solutions to help you manage your senior living clients’ risks.


  • Jason Lewis is the president of CRC’s Denver office and National Practice Group Leader.
  • Lee McClure is a healthcare professional liability broker at CRC’s Birmingham office.