Underinsurance is an unhealthy risk for many health and care operators

Many firms operating in the health and care sector don’t realise the serious implications of being underinsured, warns insurance broker, James Bright, from the health and care division of Bradford based, independent insurance broking and risk management specialist, TL Dallas.

James said: “Underinsurance in the health and care sector can lead to severe financial, legal, and reputational damage. The sector is particularly susceptible to being underinsured, which can be due to the time constraints on providers. Other factors such as rising costs, budget constraints, regulatory changes and obligations, compliance issues, underestimation of liability risks, complex insurance needs and the increase in litigation and compensation claims can all contribute to leaving businesses exposed.

“It’s therefore vital insurance is given time and attention so that operators are covered adequately and meet their contractual requirements with local authorities, residents and employees. It’s also equally important that they know who to turn to for guidance and help. Many companies can find it difficult to navigate and identify the right insurance policies.

“Health and care operators potentially face a higher risk of legal claims from employees, residents or their families due to accidents, neglect, or malpractice. Without adequate liability insurance, company owners and directors can be exposed to significant personal financial and legal risks, which can obviously have considerable impact.

“Having personally worked in the health and care sector for the last 14 years, and with an affiliation with many care associations across the UK, we have seen it’s common for some operators to opt for the cheapest policy, without fully understanding the implications. It’s the responsibility of the insurance broker to help clients navigate what they are covered for, which is why the in person, comprehensive risk review that we provide, totally free of charge, is popular with many health and care operators whether this be at renewal, or during the policy period.”

James emphasises the importance of working with specialist insurance brokers that understand the unique risks, and that have an experienced and dedicated team with knowledge of the sector.

He added: “At TL Dallas we also have our own in-house claims team that gives peace of mind, and we recommend a regular review of insurance coverage in good time, to get the best outcome from the market. At TL Dallas we are able to access the whole of the market, so we are able to provide an all-encompassing review of what’s on offer.

“By reviewing existing insurance policies promptly before the renewal date, health and care providers can better protect their organisation from financial risks, legal claims, and operational disruptions due to underinsurance.”

TL Dallas has outlined some examples of underinsurance in the health and care sector:

Property damage coverage:

• A fire breaks out, causing significant structural damage. However, the building’s insurance policy was based on an outdated valuation and doesn’t account for the current cost of materials and labour needed for full restoration. As a result, the insurance pay-out is insufficient to fully rebuild the property, leaving the operator to cover the remaining costs.

Liability coverage:

• A service user suffers an injury due to inadequate safety measures or staff negligence. The care provider has liability coverage, but the policy limits are too low to cover the full cost of legal fees and the settlement amount in a lawsuit. The provider is then left to pay the excess costs.

Business interruption insurance:

• A care operator experiences a temporary closure due to storm and flood damage. The business interruption policy is not based on the correct turnover and indemnity period, so it only covers a proportion of the lost income during the closure. This leaves the operator with a significant financial shortfall.

Equipment breakdown insurance:

• Essential equipment such as medical devices, heating systems, or passenger lifts break down, causing disruption to care services. The operator does not have adequate insurance for equipment breakdown. This results in the operator having to fund the repairs or replacement themselves, which can be costly and can significantly impact the provider’s health and safety obligations.

Cyber insurance:

• An operator is a victim of a cyberattack, such as ransomware, which compromises patient records. If the operator does not have adequate cyber insurance, or the coverage limits are too low, they may face significant financial consequences when trying to recover data, handle legal obligations, and address reputational damage.

Malpractice or professional indemnity insurance:

• An operator is involved in a medical malpractice litigation due to alleged negligence in providing medical care to a resident. If the operator’s indemnity insurance policy has low coverage limits, the costs associated with legal defence and any settlement may exceed the policy limits, leaving the care home exposed financially.

TL Dallas also works closely with other industry experts including solicitors, risk management professionals and Care Quality Commission (CQC) advisors to provide a wealth of knowledge and relevant guidance to clients.

Visit: www.tldallas.com/health-and-care-insurance email james.bright@tldallas.com or call him on 07984 143885 to book a complimentary review.