UK care homes face soaring insurance premiums, charity warns

UK care home providers face paying up to four times pre-pandemic levels for their insurance, leaving “many” at risk of going out of business, a leading charity has said.

The higher premiums come on top of pressures caused by lower occupancy rates, staff shortages, a shortfall in funding, and soaring energy bills and other costs.

“Some of our care home provider members are paying 300 to 400 per cent more in insurance premiums since Covid-19,” said Martin Green of Care England, the largest representative body for independent social care services in the UK.

“Allied to all the other enormous financial pressures, such as energy costs, staffing and a significant increase in the general inflation rate, [these] could combine to destroy many care providers,” Green said.

The UK has 12,147 registered homes for those aged 65 and over, according to May 2022 figures from regulators on carehome.co.uk, which collates reviews from residents and their relatives.

Care home businesses require insurance to cover buildings, operations, staffing and care. Insurers base the premium on ratings from the Care Quality Commission, the regulator.

Part of the problem is that fewer insurers now offer cover. “Insurers have left the market. They are no longer underwriting the care home business because of Covid,” said Green. “If you can’t get insurance, you can’t get registered by the CQC and you have to close down.”

Philip Dearn, the healthcare practice leader for the UK and Ireland at insurance broker Marsh, which looks after 1,250 care providers, acknowledged the pandemic had been a “major concern” for insurers.

In the first four months of the pandemic, care homes in England and Wales registered more than 20,000 deaths of elderly and disabled residents linked to Covid-19, official statistics show.

Underwriters feared that the pandemic could result in a flood of claims from those receiving care because of the number of fatalities.

“The government gave immunity to the NHS for litigation over Covid-19 but failed to do the same for the social care sector,” Green said. “That has created a real dynamic. Insurers got concerned about liabilities.”

The feared deluge of claims has not materialised, Dearn said, but “the response was some very dramatic price increasing”.

“It could be anywhere from 30-40 per cent to 400 per cent.”

Care homes “have certainly been hit harder than some sectors, especially if you look at elderly care”, said Mark Westgarth, managing director and global practice leader of health and care at Howden Insurance Brokers.

“As a result of Covid a number of insurers stopped writing any new business, deciding instead to focus on their existing customers,” Westgarth said. “This lack of choice then pushed prices up.”

Mike Padgham, whose family business owns five homes with 137 beds and about 200 staff, said he paid £12,000 a year for insurance before the pandemic struck in 2020. In 2021, the cost rose to about £48,000.

“You’d expect to pay more but not [that] it jumps so fast,” Padgham says. “It’s never been easy but things have got much more difficult.”

Average occupancy rates fell from 85 per cent to about 77 per cent in the financial year 2020/2021, healthcare consultancy LaingBuisson reported. That recovered to about 80 per cent by December, with pre-pandemic levels expected to return some time next year.

At the end of February there were 360,792 care home residents in England, 7.9 per cent fewer than before the pandemic, the Office for National Statistics said.

Homes are also struggling to recruit and retain their workers. A tenth of job vacancies remain unfilled, compared with 6 per cent in March last year, according to April figures from Skills for Care, which tracks movements.

Some homes have stopped accepting new admissions since they have insufficient staff to take care of them.

The government has promised the sector a slice of its health and social care levy. But critics say that is not enough. Reforms will cost a minimum of £25.5bn over the next 10 years, £10bn more than the government’s assessment, a recent report by the County Councils Network and Newton, a consultancy, claimed. Other estimates have put the cost even higher.

“Social care needs a lot more money,” says William Laing, co-founder and director of Laing Buisson. “If anything, an extra £2.5bn a year is likely to be an underestimate” for fees, staff pay and rising demand.