Demystifying Insurance

Having an insurance policy in place is one of the most important parts of running a business but often it is accompanied by much confusion. Navigating through all the different options to choose from can be difficult and understanding those differences in policies can leave you wondering which one truly offers the best cover for you.

Here at Everywhen , we know that can be the case, that’s why we have created a guide to walk you through what you need to be aware of when it comes to insurance. As Care England’s preferred insurance provider, we want to make choosing the right policy for you and your care business as easy as possible.

With the increasing cost of labour and materials globally, it is vital care homes ensure their buildings are sufficiently insured. It is solely the policyholder's responsibility to ensure that the property is covered correctly.

In order to do so, businesses are encouraged to have valuation surveys undertaken at least every three years. These valuation surveys will be able to consider any changes in the market that may have affected rebuild costs.

Several different factors have contributed to the increase in the cost of raw materials and construction charges.

For example, Brexit has led to a shortfall of 330,000 people in the UK labour force^[1], meaning that the cost of labour has now increased by 30%. As well as an increase in labour, the cost of construction materials including cement, timber and steel increased by 60%^[2].

Additionally, we are still feeling the impact of the COVID-19 pandemic. Individuals and businesses are still experiencing a shortage of labour and a reduction in the supply of certain building materials resulting in an increase in costs.

Environmental factors have also contributed such as the roll out of new low emission zones which issue congestion charges and the banning of materials previously used in construction. The war in Ukraine is also impacting what materials UK businesses can get access to.

Most commercial property insurance policies in the UK include what’s known as an “average clause”. Essentially, this means if you haven’t paid the correct premium for your property, the claim paid will be reduced by the same percentage you are underinsured by. For example, in the event of a claim, if you have underinsured your property by 50%, the claim will be reduced by 50%. This average clause is included by insurers and underwriters to deter policyholders from deliberately underinsuring.  As you can imagine, this can lead to disastrous consequences should your care home suffer damage.

To prevent this, it is worth factoring in funds in your annual business budget to pay for getting an official survey of the property done. Getting regular valuations by a professional company will help ensure that the building sums insured are correct. This will mean you can focus on running your business with the knowledge that your insurance is sufficient for your business needs in the event you need it. It is also worth remembering that in the event of a claim, the cost of the valuation will pay for itself when you receive the correct payment instead of a percentage of it.  Some insurers even reward businesses which strive to keep as accurate building sum insured as possible, by applying an “Average Waiver Clause” which means should you need to make a claim and somehow find you are underinsured, the insurer will not apply the average clause.

Please note, your building sums insured should be based on the reinstatement cost rather than the market value and if your property has features, restricted access or is a listed building, this could further impact the rebuild cost too.

It’s easy to think that it’s unlikely to happen to you but these disasters do happen, especially now when the number of properties which are underinsured is rising.

The following examples demonstrate how an innocent undervaluation can lead to paying a high price.

A portable CD player experienced an electrical fault which resulted in a fire, causing £25,000 in damage to a care home. It turned out that the care home operator was only insured for £10,000 in contents cover, when the loss adjuster calculated the actual value of the contents to be ten times that, at £100,000. What’s more, the claims settlement was reduced by the percentage the care home was underinsured, resulting in the policyholder receiving only £2,500 – just 10% of the total cost of the damage.

A care home with a buildings sum insured of £1million suffered a fire which burned the entire home to the ground. The loss adjuster calculated that the real value of the buildings sum insured was actually £2million, meaning that the building was underinsured by half. The average clause in the policy meant that the policyholder received a payout reduction of 50% of the £2 million total loss at just £1 million , meaning they had to fund the remaining £1million of the rebuild works themselves.

Should a claim arise, you may have to provide evidence to support your claim, including potentially in a court of law. By making sure that your policies and procedures are up to date, you should find it far easier to evidence that you have been acting with reasonable care.  Records such as risk assessments, staff training, care plans etc can allow you to show you have been complying with the latest guidelines.

It is worth noting that even defending claims can come at a cost. For example, solicitor’s fees, court fees etc.

As you may recall during the pandemic nearly all insurers within the social care market closed their doors to new business risks and some even walked away from their existing clients, unable to offer ongoing renewal terms. In the last year we have started to see a recovery with some insurers reconsidering their risk appetite and offering new quotations for well managed risks.

The question is, what can you do to make your organisation attractive to an insurer? You may find that you are already doing some of these things without even realising that it can help you find the right insurance policy for you. These include:

• Obtaining a CQC rating - This gives the insurance provider an in depth look at your particular business and how it operates. Ideally insurers want ‘Good’ or ‘Outstanding’ rated care homes, but should your home receive a ‘Requires Improvement’ rating then we are still able to provide cover if you are able to provide evidence of a detailed and up-to-date action plan. If you have a ‘inadequate’ rating, we may be able to obtain a quote if part of a larger portfolio on referral. Here at Everywhen, we reward any care homes who receive ‘Outstanding’ with a premium discount.

• Be proactive against reducing claims - You should also provide a thorough history of your claims background which plays an important role for whether an insurer will offer cover at all. If you have a good claims history, insurers may take this into consideration when it comes to calculating your premium. On the other hand, if you have made claims in the past, insurers will want to see that you have put adequate measurements in place to prevent the situation reoccurring.

• Trust in your broker - Another tip is when it comes to speaking to your broker ahead of your business renewal, there is no such thing as too much information. Keeping your dedicated point of contact at your broker abreast with any changes as they arise throughout the year will allow you to develop trust.

• Mention your membership - As a Care England member, you should make sure to mention to your insurer that you are a member of this professional association as it may help you when speaking to insurers that you are part of this association that we trust.

• Show off your USPs on your website – When we are researching your care home, we will look at your website to see how you stand out from competitors, how you are reviewed by service users and their families and if all the relevant information regarding your care home is published and accessible. Make sure that your website is up to date and showcases your care home effectively to both your customers and your broker.

At Everywhen, we recommend that Care England members get in contact with their broker roughly 90 days before the renewal date to allow ample time to update their broker and their cover with any changes.

If you intend to shop around for other quotes, you can expect to be asked:

• Business activities undertaken,

• Risk management procedures,

• Recruitment policies,

• Full details on construction details of care homes

• Directors’ history in terms of past bankruptcies and convictions.

You can also expect your broker to ask about any changes to your business activities, changes to sums insured, claims review and your current CQC position. Additionally, if a home is rated lower than ‘Good’ (or equivalent for other regulatory bodies), insurers will expect to see relevant Action Plans and commentary.

Unlike some insurance brokers, we offer 24 months of indemnity as standard while others have only 12 months. This means that if your care home is burnt to the ground and you need to rebuild it, then you only have 12 months to clear the site, get planning permission, rebuild, reopen and most importantly get the same number of residents you had prior to the incident otherwise your loss of revenue cover will cease.

We believe that this is too tight a deadline, during what is already a highly stressful period. As one of the longest standing brokers within the care sector, we believe a 24 month period will give you enough time to be able to get back up to where you were, ensuring that we cover the costs for the completion of most, if not all works. For larger care homes, we offer an indemnity period of 36 months.

Businesses operating in the care sector are continuing to be subjected to ever increasing regulations and requirements which are having a significant impact on how they operate. When GDPR came into effect in 2018, organisations in the health and social care sector were given much stricter guidelines than others on the collection, processing, and storage of personal data.

Due to the sensitive nature of the personal data on record at care homes, including ‘personal identifiable information’ (PII), this data is very valuable for cyber criminals as it may be utilised for identity theft, fraudulent activities, or malicious intent.

Many businesses operating in the health and social care field do so with modest cyber security budgets and use potentially outdated IT systems, leaving many care homes vulnerable targets for cyber criminals. However, it is vitally important that appropriate measures are put in place to ensure all data is handled securely. You can increase cyber security in your care home by implementing strong passwords, multi-factor authentication, control access, encryption codes, staff training, secure online back ups to name a few.

Everywhen have been working within the social care sector since 1982 and still have clients who have been with us since the very beginning. As well as supporting clients for over 40 years, we have strong partnerships with Care England who we have been working with for over ten years.

We have a team dedicated to working exclusively with social care businesses, meaning they understand the sector and issues being faced by care providers. Working across multiple offices, we also engage with our local communities, and support the work of regional care associations and charities.

Our Care Home and Domiciliary Care policies have been created to benefit care providers, rather than to minimise insurer claims and are continually evolving to meet the sector’s needs. From a start-up domiciliary care agency to a large care home group, Everywhen have the expertise to support your business.

For more information on how Everywhen can assist you with finding the protection your business truly needs, please call us on: 0330 123 5154 email: newcare@verywhen.co.uk.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems, we recommend that professional advice be sought.

[1] theguardian.com/politics/2023/jan/17/shortfall-of-330000-workers-in-uk-due-to-brexit-say-thinktanks

[2] theguardian.com/politics/2023/jan/24/brexit-uk-construction-costs-eu