What 2024 Is Teaching Us About the Human Services Insurance Marketplace 

The human services sector is undergoing significant transformations in 2024, presenting both challenges and opportunities for retail insurance agents. As the market shifts and evolves, understanding these changes is crucial for securing the best coverage for clients. Let’s explore the key trends and strategies emerging in this dynamic landscape.

The Shift to E&S Platforms

Historically, admitted carriers have dominated the human services insurance market. However, 2024 is witnessing a notable shift towards strategic Excess and Surplus (E&S) platforms. This change is driven by admitted carriers reducing capacity or withdrawing entirely due to corrective measures in their books of business and changing appetites. The move towards E&S options is not just a trend but a necessity in many cases. As the market hardens, E&S platforms offer the flexibility and tailored solutions that many human services organizations now require. Retail agents need to familiarize themselves with these E&S options to effectively serve their clients in this changing landscape.

The Mental Health Crisis and Market Expansion

Concurrent with the shift in insurance platforms, the United States is facing a significant mental health crisis. This has led to an expansion of the mental health field, despite the overall hardening of the insurance market. New facilities and therapy modalities are emerging, including innovative treatments involving ketamine and psychedelics. While this expansion presents opportunities, it also introduces new risks, some of which could be considered predatory. Retail agents must stay informed about these new treatment modalities and their associated risks to properly advise and protect their clients.

Rising Abuse Claims and Coverage Challenges

Abuse continues to be the most prevalent loss driver in the human services space, with claims on the rise. What was once a last-resort option for standalone abuse coverage is now commonly employed. Many markets are sublimitting abuse coverage in primary policies or excluding it entirely from umbrella coverage. Currently, only a handful of carriers, including London wholesalers, are 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 awareness, the issue hits closer to home for many, adding another layer of complexity to the market.

Key Considerations for Retail Agents

1. Thorough Submissions: In this constricting market, a complete and well-documented submission is crucial. It helps build underwriter confidence and increases the chances of securing coverage.
2. Detailed Service Breakdown: Many human services organizations provide an array of services. Clearly outlining these services and explaining the percentage of operations attributed to each is vital for accurate risk assessment.
3. Coverage Pitfalls: Be aware that E&S carriers may offer 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.
4. Regional Variations: The market varies significantly by region. States like California, Arizona, New Mexico, New York, Florida, Pennsylvania, Georgia, and Illinois are particularly challenging venues for human services insurance.

Navigating Market Challenges

As we move through 2024, 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 claims-made professional liability and abuse coverages have helped build capacity, but excess occurrence capacity remains limited. Many carriers are not able to sit in excess of RRGs, further complicating the market landscape.

Strategies for Success

1. Proactive Expectation Management: Retailers should proactively manage insureds’ expectations well in advance of renewal dates. This preparation can help clients better navigate the harder marketplace.
2. Focus on Risk Management: Underwriters in this line look for sound risk management protocols. Highlight the type of services provided (inpatient vs. outpatient) and the population served (adults vs. children or patients with a history of violence).
3. Emphasize Continuum of Care: Facilities that provide a continuum of care should clearly articulate this in their submission. For those that don’t, robust systems for admission and discharge criteria, along with documented community partnerships for ongoing care, are crucial.
4. Facility Design Considerations: Facilities designed specifically for the type of care provided, rather than repurposed buildings, can help address safety and suicide prevention concerns.
5. Engage with Risk Management Support: Proactively engaging with risk management support, such as that provided by specialized consultants, rather than waiting for a claim or incident to occur, is a key part of sound risk management protocols.

The Role of Wholesale Brokers

In this challenging market, partnering with a wholesale broker specializing in human services can be invaluable. DOXA, for instance, brings experience and creativity in putting together programs tailored to the unique needs of human services organizations. Their expertise can be crucial in navigating the complexities of this evolving market landscape.

Looking Ahead

As we progress through 2024, the human services insurance market continues to present both challenges and opportunities. The shift towards E&S platforms, coupled with the expanding mental health sector and rising abuse claims, creates a complex landscape for retail agents to navigate. Success in this market requires a deep understanding of the evolving risks, a proactive approach to risk management, and the ability to secure comprehensive coverage in a tightening market. By staying informed, managing client expectations, and leveraging partnerships with specialized wholesale brokers like DOXA, retail agents can effectively serve their human services clients in this challenging environment. The human services sector plays a vital role in our communities, and ensuring these organizations have the right insurance coverage is more important than ever. As the market continues to evolve, retail agents who adapt, stay informed, and leverage expert resources will be best positioned to support their clients and navigate the complexities of the human services insurance landscape in 2024 and beyond.