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Investment Growth & Insurance Challenges in Senior Housing

Friday, January 28, 2022
Investment Growth & Insurance Challenges in Senior Housing
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By: James Phelan, Sales Executive, Business Insurance

Senior housing is an integral component of the healthcare continuum, and this needs-driven industry presents strong opportunities for investment growth as the baby boomer population ages into their 80s.

As the industry matures around product diversification, segmentation, and evolving consumer preferences; operator marketing plans must be expanded to attract residents and the workforce. However, key challenges are ongoing across the industry involving labor and wages, COVID-19 recovery and squeezed margins. Here are a few strategies to help face investment growth and insurance challenges in senior housing. 

Implement a Benefits Strategy to Attract Labor

The senior housing industry is struggling to attract labor. Both staffing and retention have been challenging – especially during the COVID-19 era. However, implementing a benefits strategy can maximize the value of benefits offered while driving down costs.

While all healthcare leaders want to offer great benefits that attract and retain staff, the reality is that it can be challenging to balance this with the increasing costs associated with offering coverage to their employees. A trusted benefits advisor can help organizations develop long-term benefits strategies and introduce innovative ideas that manage cost while still offering great benefits to their employees.

An effective benefits strategy should accomplish the following:

  • Develop benchmark plans and a roadmap to position yourself ahead of peers
  • Enhance communication to help employees better recognize the value of benefits
  • Implement efficient technology to simplify the benefits enrollment process while also remaining compliant. Please note that it is important to already have a good platform established, so you can easily scale up.

COVID-19 Risk Management

It’s no secret that the COVID-19 pandemic is prevalent in senior living facilities and is a leading cause of death amongst senior citizens. In fact, The New York Times has reported that one in every 100 older Americans has died from the virus.

While many insurance carriers have implemented Exclusions related to COVID-19, pandemics, or infectious disease into their policy forms; there is still uncertainty surrounding if and how COVID-19 claims will be addressed in the future. 

Underwriters are taking a close look at the protocols that operators have established during the COVID-era, to the extent that many will decline a risk if the following risk management items are not being proactively addressed:

  • Established infection controls
  • Documentation of incidents and response
  • Positive trending vaccination rates amongst staff and residents

Taking Advantage of a Market in Flux  

From a margin standpoint, the senior housing industry has been squeezed on both ends. Occupancy rates are lower than normal, making it tougher to raise rents. Additionally, products and services have increased in price – insurance, in particular, has become a large budget item.

Over the last 18+ months, conditions became very difficult for buyers as adverse loss experience, years of premium slashing, litigation and COVID-19 have led to a hard, transitioning market for Property & Casualty insurance for senior housing. On the other side of the table, underwriters were faced with an extremely challenging workload, as they simultaneously navigated a hardening market while working from home, leading to last minute and often poor results. Even the “Best in Class” operators were seeing liability increases upwards of 15-20%.

Entering 2022, we’re seeing a senior housing insurance market that is still in transition, but with some very competitive results as carriers are trying to write their way out of various problems, including but not limited to profitability, lulls in new business, underwriter changes, and new entrants stirring up competition. Select carriers are aggressively pursuing operators with industry-leading controls, specifically around infection control and vaccination rates.

Operators that can create leverage, can take advantage of favorable trends in the market. It is important to realize that the renewal process is a two-way street. To achieve the highest level of engagement and results from a carrier, a qualitative story is equally important as quantitative information. Various factors can push a company to the top of a carrier’s stack, including early proactive dialogue, quality of risk and thoroughness of a submission.

Final Considerations on Challenges in Senior Housing

In effort to move the needle on challenges related to labor, COVID-19, and squeezed margins – your insurance broker can be a great resource.

While the senior housing industry is positioning itself for growth, it is an optimal time for operators to evaluate if their insurance relationships are positioned to grow with them.

Here are a few questions to consider:

  • Is our insurance relationship adding value to the culture of our organization through effective benefits, wellness and safety programs?
  • On a scale of 1-10, how have we handled COVID-19 protocols? If not a 10, how do we get there?
  • What is our plan to actively control our insurance costs over the next 2-3 years?
  • How do we tell our story to the insurance market? Do we have a detailed, proactive, and strategic plan to maximize the results of our benefits and property & casualty programs?

The Horton Group’s healthcare team is available to help. Schedule a consultation here to plan for the various challenges in senior housing.

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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