Potential insurance implications of the Aged Care Royal Commission final report
March 19, 2021
The long-awaited final report from the Royal Commission into aged care quality and safety was released earlier this month, recommending sweeping changes to the aged care sector.
The report made 148 recommendations, many of which – if adopted by the Government – will result in new legislation and increased regulations that aged care providers will be required to meet.
The Australian Government has yet to formally respond to the Royal Commission’s recommendations other than to announce some immediate funding measures.
Insurers will be keeping a keen eye on the changes, and of the Royal Commission itself, particularly whether they are likely to include a higher risk of claims activity and liability across a range of liability insurance classes, says Emma Roberts, special counsel at leading insurance firm Hall & Wilcox. However, Ms Roberts also suggests that the implementation of some or all of the recommendations is likely to lead to a positive outcome with increased risk awareness and management across the entire sector.
Potential impact on claims
Ms Roberts says that while the Government has not yet released its response to the Royal Commission’s recommendations, the final report recommends a complete overhaul of the aged care system.
“If the recommendations are adopted, it’s expected the aged care sector will become more heavily regulated and likely to have three key pressure points for insurers.”
Firstly, Ms Roberts says, there is a risk, at least in the short term, that litigation (which is a key driver of insurance costs) in the aged care sector increases due to better public awareness of the issues in aged care. “There’s a possibility that where people may have previously not lodged claims for incidents in aged care, they now may be more inclined to do so following the Royal Commission .”
Ms Roberts says there is also a risk of an increase in employment practices liability claims brought against aged care providers by their employees, after evidence emerged in the Royal Commission regarding the pressures some staff working in the sector are put under.
There is also a potential for increased professional indemnity and director’s & officer’s insurance claims as a consequence of some providers failing to meet the revised regulatory standards that are likely to be introduced.
Recommendation 14 is to impose a statutory duty of care on any approved provider to ensure that the personal care or nursing care they provide is of high quality and safe so far as reasonable having regard to the wishes of any person for whom the provider provides, or is engaged to provide that care; any reasonably foreseeable risks to any person to whom the provider provides or is engaged to provide that care; and any other relevant circumstances.
Civil penalties will be imposed upon directors under Recommendation 10 and under recommendation 101 there will be accessorial liability for key personnel who aids, abets, counsels or procures the approved provider to commit the contravention or is in any other way, directly or indirectly, knowingly concerned, or a party to, the contravention by the approved provider.
“In the event the recommendations are adopted, insurers will need to be increasingly mindful of policy wording for aged care providers to ensure wording reflects the requirements to meet regulatory and statutory frameworks.” Ms Roberts said.
Funding challenges amongst cost pressures
Complying with more onerous regulations will put additional cost pressures on aged care providers. Key to this will be recommendations that staff are more highly trained, better paid and that staff to resident ratios are improved.
An additional $452 million in funding was announced following the release of the report, and Ms Roberts says the industry, and insurers, will be watching closely to see how the Government will help aged care providers meet the costs of any additional regulatory burden.
The recommendations made by the Royal Commission are currently under review by the Government. Additional funding for the sector is expected to be announced in the Federal Budget in early May, with the full Government response to the Royal Commission due to be released by May 31.
The aged care experts
Gow-Gates is one of Australia’s leading insurance brokers in the aged care sector. Our deep industry knowledge, coupled with our insurer relationships, enables us to deliver tailored insurance and risk management solutions for aged care providers.
For a discussion about the changing insurance environment due to the Royal Commission, or any other insurance matters, you can contact us by emailing email@example.com or calling 02 8267 9999.