As the human services sector faces a mental health crisis and evolving market dynamics, how can retail insurance agents navigate the shift towards E&S platforms and manage rising abuse claims? Discover essential strategies for staying ahead in this challenging landscape and securing the best coverage for your clients.
The human services space is undergoing significant change, making it a crucial time for retail insurance agents to understand the nuances of the marketplace. Historically, this market has been dominated by admitted carriers. However, in 2024, there is a notable shift towards strategic Excess and Surplus (E&S) platforms. Admitted carriers are reducing capacity or withdrawing entirely due to corrective measures in their books of business and changing appetites. Concurrently, the U.S. is facing a mental health crisis, leading to the expansion of the mental health field despite a hardening market. New facilities and therapy modalities, including ketamine and psychedelics, are emerging, some of which pose predatory risks. Retailers should be proactive in managing their insureds’ expectations and preparing for shifting market conditions.
TYPES OF RISK IN PLAY
The human services class generally encompass facilities providing mental or behavioral health care, substance use care, and care for the intellectually and developmentally disabled (IDD). Abuse continues to be the most prevalent loss driver in the space, with claims on the rise. What was once a last-resort option for standalone abuse coverage is now commonly employed, and many markets are sublimiting in the primary or excluding abuse coverage in the umbrella altogether. There are only four or five carriers, including London wholesalers, willing to write standalone abuse coverage. The emotional aspect of these claims, given the vulnerable populations involved, makes the risk more personal and pressing. With the growth in mental illness, nearly everyone knows someone affected, bringing the issue closer to home.
THE OPPORTUNITY
As sexual abuse coverage becomes more restrictive, robust risk management around sexual safety in treatment settings is essential. Facilities must employ comprehensive policies and procedures, undertake rigorous annual policy reviews, and conduct facility audits to ensure compliance. Additionally, a rise in violence, including patient-on-patient and patient-on-staff incidents, is leading to more risks being placed in the E&S market. Retailers need to approach the market with complete and well-documented submissions to help build underwriting confidence. It’s important to outline the array of services provided by human services facilities and explain the percentage of operations attributed to each service.
KEY CONSIDERATIONS
When approaching the market, retailers must be aware that the market is constricting. While carriers are still more widely willing to write the PL/GL, only three or four are willing to provide full Sexual Abuse and Molestation Liability (SAML) limits. A thorough and accurate submission from the start is critical to obtaining coverage, especially if the markets may otherwise be skeptical. Additionally, many human services organizations provide an array of services, which makes it vital to clearly outline those services and explain what percentage of an insured’s operations are attributed to each service. Common coverage pitfalls include E&S carriers offering less costly terms with significant sublimits on major exposures. Changes in statutes of limitations for abuse and molestation claims have also led to carriers limiting retro dates and only honoring the last five years.
THE CHALLENGES
Retailers should prepare for package policies to be tested and divided. Rates are expected to continue rising while coverage becomes tighter, and capacity is becoming more challenging to secure. Contracts requiring $10M+ in abuse coverage may find this capacity too expensive or non-existent, depending on the class. Admitted carriers and national RRGs switching to claimsmade professional liability and abuse coverages have helped build capacity, but excess occurrence capacity remains limited, and many carriers are not able to sit in excess of RRGs. Regional variations also affect the market, with states like California, Arizona, New Mexico, New York, Florida, Pennsylvania, Georgia, and Illinois being particularly tough venues. The West Coast and Northeast have also proven difficult venues for the class.
HOW AGENTS CAN HELP
Retailers would be wise to proactively manage insureds’ expectations well in advance of renewal dates so that they can be more prepared for a harder marketplace.
Underwriters in this line look for sound risk management protocols, the type of services provided (inpatient vs. outpatient), and the population served (adults vs. children or patients with history of violence). Transition of care in behavioral health settings is also critical, with multiple levels of care preferred. Those facilities that provide a continuum of care, should clarify that within the submission. If a continuum of care is not provided, insureds should maintain a robust system for admission and discharge criteria and document community partners tasked with handling ongoing care. Facilities designed specifically for the type of care provided, rather than repurposed buildings, help with safety and suicide prevention concerns. Proactively engaging with risk management support, like that provided by OmniSure, rather than waiting for a claim or incident to occur is also a key part of sound risk management protocols. If not yet engaged, policyholders should at least have a letter stating an intent to engage help from a risk management support organization. CRC can actually build OmniSure into the insurance program, even without a direct contract.
BOTTOM LINE
The human services sector is undergoing significant transformations, making it imperative for retail insurance agents to be savvy when navigating the evolving marketplace. In 2024, a shift towards E&S options is evident as admitted carriers reduce capacity or exit due to revised business strategies and shifting appetites. Amid a U.S. mental health crisis, the sector is expanding despite a hardening market, with emerging therapies and facilities presenting new risks. Retailers must manage insureds’ expectations, particularly regarding restrictive sexual abuse coverage and heightened rates.
Engaging with risk management support, such as OmniSure, can enhance safety protocols and play a role in securing better coverage, especially in an evolving market landscape. Partnering with a wholesale broker specializing in this challenging class of business, with experience and creativity in putting together programs, is also especially crucial. Reach out to Team CRC today for assistance.
CONTRIBUTORS
GUEST CONTRIBUTOR
Michelle Foster Earle, ARM Chief Executive Officer OmniSure Consulting Group
Michelle Foster Earle, ARM, is the CEO of OmniSure Consulting Group, an independently owned firm with more than 20 years of success in healthcare risk management. OmniSure helps professional liability insurers reduce risk and prevent losses. Michelle started her career in social services, became an administrator, healthcare executive, regulatory and best practices consultant, and then founder of OmniSure. On behalf of their insurers, OmniSure helps multiple types of healthcare organizations, medical professionals, and human service organizations manage risk, improve performance, and maintain compliance with regulatory and accreditation standards through a nationwide network of clinical risk specialists. Michelle is a frequent speaker on healthcare and human services risks for industry conferences and has received a number of awards, including the Elite Women of 2021 Award from Insurance Business America
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END NOTES
- Number of mental health treatment facilities in the U.S. in 2022, by service setting, Statista, January 22, 2024.
- The State of Mental Health in America, Mental Health America, 2024.
- Total number of substance abuse treatment facilities in the U.S. from 2003 to 2022, Statista, December 7, 2023.