Liability costs continued to rise for senior living and care operators last year, although “the underlying dynamics that impact loss costs may be shifting,” according to a new actuarial analysis from WTW.
Now that the COVID-19 pandemic is over and its ripple effects have lessened, long-term care providers are focused on more traditional issues such as “a rapidly aging population and rising acuity that increases the risk of higher claims volumes and elevated losses if operators are not assigning the right level of care to residents,” according to the report.
Loss costs experienced by providers increased by 3.74% on a compounded annual growth rate over the decade between 2012 and 2022, WTW said.
“That steady increase has been supported by offsetting dynamics in frequency and severity, which have helped keep a check on loss costs accelerating faster. However, loss costs have started increasing at a more rapid clip over the past seven years, with estimated loss costs in 2023 a third higher than they were in 2016,” according to the report. “While projected loss costs are on trend, claims frequency has increased more than expected.”
Resident falls account for 31% of the total losses for the sector, WTW said. Falls frequency increased year over year, “which means that despite falls having a lower severity relative to other causes of loss, it is still the costliest per exposure.”
Another factor is elopement, or the wandering away of residents from the senior living community or nursing home. Elopement has overtaken choking instances in loss severity or the cost per incident, according to the report.
Overall, average severity across all claims dropped year over year.
“While it is not clear from the data why severity has eased, one explanation could be that allegations of care quality levels increased during the COVID-19 pandemic due to lockdown restrictions, resulting in more precautionary and conservative loss reserves on claims made during that tumultuous period,” WTW said.
The benchmark study also offers several tips to help providers mitigate the cost and severity of claims on a state-by-state basis.
