Are Your Insurers Pockets Deep Enough?

The care sector has been always been under supported by the insurance sector. This has led to historically higher premiums with little competition to drive down premium. The insurance market is now shifting and, with the coming of Brexit, there are changes that you should be aware of to protect your business. A little knowledge can save a lot of money and even your livelihood.

I have been looking after insurance for care providers for twenty years. I have seen the market go in cycles from ‘hard’ to ‘soft’ meaning that premiums insurers request for the same exposure go up and down. During this time there has always been a select group of insurers supporting the sector. Some have exited the market (most famously, perhaps, Ecclesiastical) and some have failed such as the Liechtenstein based unrated insurer Gable. The failure of Gable was felt by many care homes. There was protection under the Financial Services Compensation Scheme (FSCS), but clients were contributing towards claims payments for some significant third-party injury and abuse claims.

The state of the insurance market today is relatively healthy, but it is certainly a market in which risks are taken more than at any time in recent memory. Insurer failures are surprisingly common. A quick google of Elite, Tradewise, Gefion or Alpha shows just how prevalent the problem is.

So, despite the clear risks of unrated, or non-UK insurers, are many insurance brokers using them? The answer is a clear yes. Unfortunately, much like the ‘Claims Made’ issue, clients are never given the full picture at point of sale and therefore do not understand it is often a false economy and can be risking everything. A few takeaway points you should consider about Insurer’s financial health:

• Unrated insurers provide you with no peace of mind that claims will be paid in full, or that the premium you have paid for cover will be returned in the event of failure

• Unrated insurers don’t necessarily have audited accounts, particularly non-UK insurers.

• Non-UK insurers may not provide you protection under the Financial Services Compensation Scheme (FSCS)

• Even if you have FSCS protection from a non-UK insurer, this doesn’t protect you from large losses as you will have to contribute to losses from non-compulsory covers.

• The position could well change with Brexit and legislation may change mid way through your policy year.

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