Helping social care businesses position their risks in the insurance market

This update draws on Howden Health & Care's extensive experience working with thousands of social care organisations across the UK, including hospices, residential and nursing homes, domiciliary care agencies, rehabilitation units, and sheltered or supported living businesses. Here, we provide an overview of market conditions in 2024 and offer insight into the outlook for specific insurance lines available for the sector.

An overview of the insurance market for social care sector

The insurance market for health and social care providers is showing improvement, with competitive momentum building throughout 2024 and expected to continue into 2025.  The market volatility caused by inflation and supply chain disruptions, seen earlier this year, appears to be stabilising. Helping to reduce the impact on costs for businesses.

Since the pandemic, social inflation, shifts in public sentiment, and media influence have driven up claims costs, especially for liability and motor coverages. Despite this, the introduction of new insurers like Allied World, a partner exclusive to Howden, has boosted competition, offering more options for social care operators seeking insurance solutions.

Insurers continue to prioritise good Care Quality Commission ratings and a strong focus on risk management and controls, as these factors help clients differentiate their risk profiles and secure favourable terms. For most care providers, key coverage is divided between two main areas:

1. Property and Business Interruption: Coverage for physical assets and the ability to maintain operations following disruptions.
2. Liabilities: Employers’ liability, public liability, and treatment-related medical malpractice remain critical for protecting against the sector’s most significant risks.

Well-managed providers are particularly well-positioned to benefit from this , as insurers show a strong appetite for lower-risk businesses. Across several insurance lines, including property, liability, and cyber, care providers can expect premium reductions when employing effective marketing and risk management strategies.

Property damage and business interruption

The property insurance market continues to soften in 2024, with insurers showing greater flexibility on rates and a willingness to remove minimum premium levels to retain clients. Well-managed social care providers that have reviewed their insurance in recent years have seen rate reductions of up to 25%. For those who haven’t explored alternative options see their rates remain flat or experience , smaller rate increases of up to 5%.

Long Term Agreements (LTAs) and risk management bursaries are being increasingly offered to care providers with attractive risk profiles. Insurers are open to offering LTAs, however businesses should carefully consider locking into current rates, which may be higher than those that could be achieved in a more competitive environment.

Underwriters are particularly focused on the impact of inflation on property sums insured, as underinsurance is a widespread issue across the UK, including within the social care sector. Insurers expect realistic inflationary adjustments to property values due to rising building costs, material shortages, and labour constraints. Ensuring that sums insured are accurately reflected is critical to avoiding gaps in coverage.

Additionally, concerns about climate change and its impact on natural disasters and weather events remain significant. Organisations must engage in a clear broking strategy, including early market discussions and thorough risk presentations, to encourage competition and secure optimal coverage. A well-articulated risk management approach is key to differentiating providers and can lead to improved terms and competitive pricing.

Liability insurance in social care

Liability claims continue to dominate the sector, both in terms of frequency and cost. Large claim expenses typically stem from this area, making liability coverage essential for businesses. While significant rate reductions of up to 30% can be achieved for well-managed, low-claims risks, insurer appetite and capacity for this coverage remain limited compared to property insurance.

Insurers are increasingly focusing on business management processes, with a growing emphasis on fire-related losses, particularly those originating in kitchens or from deep-fat frying. Demonstrating strong health and safety risk management, alongside a thorough understanding of claims trends and post-loss mitigation strategies, is crucial for securing optimal coverage.

A key issue emerging in 2024 is Treatment coverage or Medical Malpractice. Many care providers employ or contract with prescribing nurses and expect this activity to be covered under their liability policy. However, most insurers do not automatically include such activities in standard coverage. If not addressed, these nurses may remain uninsured. It is vital that businesses discuss this with their broker to ensure appropriate coverage—some policies, like ours, include prescribing nurses as part of the standard offer.

Additionally, the increasing digitalisation of care services, such as telemedicine and tele-triage, has introduced new risks that are not yet fully understood. Insurance coverage has not kept pace with these emerging risks, and providers should be vigilant in reviewing their policies to ensure they are adequately covered for these evolving exposures.

Motor fleet

Rate increases continue to affect motor fleet insurance, even for risks with strong performance, largely driven by claims inflation. Most insurers are experiencing rising claims costs, leading to upward pressure on premiums. The key factors driving these increases include:

• Claims inflation: Labour costs and the time required to settle claims have escalated, resulting in a 10% rise in both injury and damage settlements, with hire car charges also impacted.
• Supply chain disruptions: The ongoing shortage of new vehicles and courtesy cars has led to higher costs in the second-hand market.
• Advanced vehicle technology: The growing complexity of new vehicle technology makes repairs more expensive, further adding to claims costs.
• Electric vehicles (EVs): EVs present unique challenges, such as a shortage of repair specialists and the increased fire risk posed by damaged batteries, which can delay repairs.

To secure the most favourable renewal terms, it is crucial that businesses engage with their brokers to ensure ongoing claims cleansing and effective risk management strategies are in place.

Directors' and Officers' (D&O)

(D&O) liability insurance has become an essential coverage for businesses, with its adoption continuing to grow in recent years. Following the challenges of the pandemic, when insurers were more cautious and premiums saw sharp increases, the market has now stabilised.

According to recent surveys, the top concerns for health and social care providers include health and safety, cyber-attacks (such as cyber extortion), and data breaches. Regulatory breaches are also a key risk, ranking highly in importance for the sector. These trends highlight the need for robust D&O coverage, as leaders in these organizations face increasing scrutiny and regulatory pressure.

To secure better rates, businesses are  required to provide comprehensive underwriting information, especially regarding governance, risk management, and compliance controls. Demonstrating strong frameworks in these areas can significantly improve pricing and terms.

Cyber insurance

The cyber insurance market remains strong through 2024, with a positive outlook for social care providers. However, concerns are rising following the recent CrowdStrike Falcon incident, which disrupted essential services across multiple sectors, including healthcare. This event underscores the vulnerabilities within supply chains and highlights the growing threat posed to organisations in this sector, particularly as digitisation of care records continues to expand.

Coverage is now crucial for all businesses however, only around 10% of UK businesses across all sectors have adopted cyber insurance. The risks of not having coverage can be devastating. Encouragingly, market conditions for health and social care providers are increasingly favourable. Improvements in rates and pricing, coupled with a broader range of policy options, have resulted in increased competition among insurers. This has led to greater underwriting flexibility, higher policy limits, and reduced premiums, with some businesses achieving rate reductions between 10% and 30%.

Insurers are now more willing to extend coverage and offer higher limits, often requiring less detailed underwriting information than in previous years. However, they are placing a stronger focus on the cyber maturity of organisations. This includes the implementation of key cybersecurity controls and the importance of regular cybersecurity training to mitigate risks associated with human error.

The full impact of the CrowdStrike incident on the cyber insurance market is yet to be seen, but it serves as a stark reminder of the critical need for robust cybersecurity measures across the sector. This reinforces the importance of making cyber insurance a key component of any risk management strategy for social care providers.

Social care insurance schemes have withstood various challenges across the past few years, emphasising the need for businesses in the sector to speak to a specialist insurance provider to secure suitable terms. Howden has a team of care insurance specialists who have supported businesses in the sector for over 25 years. Contact our team to see how we can help your business.