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The Risks of Long-Term Adult Home Care for Insurance Providers

November 30, 2021

From an underwriting perspective, there are both pros and cons to the long-term adult home care industry - nursing homes, assisted living facilities, and independent living facilities.

Evolution in the market

Currently, the market is evolving in response to several factors:

  • 75 million people in the Baby Boomer generation are aging into their 60’s and 70’s, needing care that puts pressure on the existing long-term adult home care system.
  • COVID-19 infection rates continue to impact long-term care facilities, especially now with new variants emerging.
  • Care staff are quitting in droves,  severely affecting admission rates (in Washington State specifically, 81% of facilities are short-staffed). A new industry report found that 58% of nursing homes and 28% of assisted living facilities in the U.S. are limiting admissions because they do not have enough staff to care for residents. This will open up the market for the smaller independent home care facilities.

As a result, a market is taking hold in which private homeowners are renting out rooms to those looking to meet demand and operate their own long-term adult home care facility. The rentals can be anything from a few rooms to entire houses that are converted into long-term care facilities. Levels of care vary depending on the facility, but doctors, nurses, and certified nursing assistants (CNAs) come in and attend to patients as they would in a licensed building. Agents must ensure that clients opening these businesses carry the appropriate insurance.

adult home care-nurse helping grandmaThe nature of long-term adult home care is changing, creating new opportunities
for insurance companies to insure these properties.

 

Related: 
A Hard-to-Spot Risk: Adult Family Homes

 

Growing market  and growing risks

There are specific risks to insurance companies that underwriters need to consider as this market grows and the opportunity to insure these properties presents itself: 

The risk for personal lines insurance

There’s an obvious problem if a personal lines insurance provider is unknowingly insuring a long-term care facility. Once a privately owned home becomes a long-term adult care facility, it essentially becomes a commercial property with all the liability associated with that type of business. Unless personal lines carriers can provide commercial liability protection or verify commercial coverage, these types of facilities could significantly impact company results.

The risk for commercial lines insurance

Commercial lines carriers must ensure they are charging enough for these types of facilities. Let’s say you insure a duplex for commercial use and the coverage is general liability. If you can’t be sure what that facility is actually being used for and it turns out to be a long-term care facility, your exposure is greater and you stand to lose money. Commercial providers can add more premium or take away coverage in this instance to make it less dangerous for themselves.

The COVID-19 risk

As with any health-based facility today, there are risks related to virus transmission.   In a scenario in which someone at a long-term care facility passes due to COVID-19, there would be various implications for the insurer – whether they are a personal lines or commercial lines carrier. It can be argued that improperly insuring a long-term care facility could lead to lawsuits over gross negligence. This issue could become particularly risky in places like Washington State, where some home care facility workers continue to remain exempt from vaccine mandates.

How to quickly identify risk in your book

Despite these risks, there is good news: this is not an uninsurable situation. With the right information, underwriters and their insurance companies can make it work.

For underwriters, BuildingMetrix offers solutions that can reduce the risk of a home-based, uninsured long-term care facility unknowingly ending up in your book of business. Our comprehensive database enables you to see which addresses in your book match a long-term care facility property in question.

All you need to run a report is a street address, city, state, zip code, and reference number of your choice to identify the returns when they come back. BuildingMetrix doesn’t require any personal information or policy numbers. We take your book of addresses and will return a list of all adult home care facilities, if any exist, within that book. The process is fast, secure, and affordable.

We currently possess data sets for multiple states, accessible for a nominal charge. If you’re a WSRB subscriber, data for the state of Washington is included with your subscription.

Get valuable property risk assessment data and convenient delivery methods now.


[1] King 5 News, https://www.king5.com/article/news/health/washington-long-term-care-facilities-face-staffing-shortage-crisis/281-6dea28d5-2dc0-4218-b1e8-3ce768b479fc

[2] American Health Care Association, https://www.ahcancal.org/News-and-Communications/Fact-Sheets/FactSheets/Workforce-Survey-September2021.pdf

[3] Seattle Times, https://www.seattletimes.com/seattle-news/health/thousands-of-washington-home-care-workers-represented-by-seiu-775-remain-exempt-from-gov-inslees-vaccine-mandate/

Chris Barclay spent 30 years underwriting personal, commercial and agricultural lines in the Western U.S. before joining WSRB to develop innovative, easy-to-use tools that help insurers manage both entire portfolios and individual accounts. Chris lives and works in Spokane, Washington.

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