Aged Care Insurance Market Update

May 15, 2020

Since creating the first Aged Care insurance facility in Australia some 40 years ago, we have observed over the years insurance rates increasing and decreasing but not to any significant degree. Despite these fluctuations, generally the industry has been treated well by insurers in comparison to others. Historically, the sector was known to benefit from some of the lowest rates and broadest coverage limits ever experienced.

However, recent events and insurance company results have caused all insurers and underwriters to adopt a much more conservative approach when assessing risk, writing new business and renewing existing policies. Coupled with this, Lloyds, the largest Insurance Market where most of the worlds Insurers and Re-Insurers are involved have introduced restricted underwriting guidelines. We are now seeing the effect flow through to all Insurers in Australia from the world’s biggest to the smallest specialist companies. With what has happened in the market place, this has meant a hardening of rates, reduced capacity and more stringent underwriting. This has also affected Aged Care, although not to the same degree as other industries.

This year insurance market conditions will still be firm. One of the driving forces recently effecting the insurance market is the impact of the Royal Commission into Aged Care. The Commission has shed light on a level of risk exposures across the industry.

Royal Commission

The Royal Commission into Aged Care Quality and Safety was established on the 8th October 2018 and an interim report issued on the 31st October 2019. The final report is due to be issued by the 12th November 2020 although given the COVID-19 pandemic resulting in delays to hearings and workshops, it is unlikely.

There are a number of areas the Commission intends to address, including an immediate need to take action on:

    • Providing an increased number of Home Care Packages
    • to reduce the waiting list for higher level care at home;
    • Reduce the over reliance of chemical restraint in Aged Care; and
    • Reduce the number of young persons with a disability going into Aged Care.

While the above items are the key focus, we believe this will also address demands on the industry in assisting the workforce with training and appropriate pay.

COVID-19

The World Health Organisation (WHO) declared the COVID-19 a global pandemic and we are now seeing the extent of the disruption across the workforce, supply chains and the global economy. Organisations will be:

    • Reviewing and updating their business continuity plans to ensure operational resilience;
    • Actioning in regards to employee management and duty of care;
    • Reviewing work-from-home strategy where applicable; and
    • Continuing to prepare a recovery plan for all operations as new challenges arise from the unknown of a pandemic crisis.

Below we have included two links that may be used to support your organisation to navigate the many challenges associated with COVID-19.

SafeWork Australia

The above link provides recommended strategies that may be incorporated within your existing Work Health and Safety framework to encourage a COVID-19 safe environment.

DLA Piper

The above link provides useful tools to assist organisations to manage the many legal challenges faced by both Directors and business owners.

Financial Lines (Professional Indemnity/Medical Malpractice, Management Liability)

The introduction of the Aged Care Royal Commission has created a spike in notifications and claims across financial lines. In response actuaries are forecasting premium increases.

Property

It is envisaged that the Insurance property market will be challenged due to substantial losses suffered by the industry in the last quarter of 2019 and the first quarter of 2020.

Over the last six months catastrophe events in Australia include:

  • September bushfires in NSW and QLD resulted in 497 claims worth $37 million;
  • October’s Rappville NSW bushfires led to 255 claims and insured losses of $19 million;
  • 20,000 claims worth $1.65 billion have been lodged for the November to February bushfires that affected QLD, NSW, VIC and SA;
  • Hailstorms during November in south-east QLD resulted in 22,000 claims worth $166 million;
  • January hailstorms in ACT, VIC and NSW resulted in 69,850 claims worth $638 million; and
  • February flooding and severe storms in NSW and QLD, have already reached $45 million.

Forecast

Through these challenging times one of the roles of Gow- Gates is that of a strategic partner supporting our clients to move forward with confidence. We are well positioned with the insurance market to help you safely navigate the current climate by partnering with you to always achieve the best insurance solution to meet your needs.

 

Gow-Gates specialises in this type of risk placement, so if you believe that this issue is relevant to your business, please feel free to contact Gow-Gates Insurance Brokers on (02) 8267 9999 to discuss your circumstances or to obtain a quotation.

Gow-Gates Insurance Brokers advises that persons should not act on the material contained in this article as the items are of a general nature only and may be misinterpreted. We therefore recommend that advice be sought before acting in these areas.

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