This article is sponsored by the ServiceMaster. This article is based on a Senior Housing News discussion with Cal McCarty, Senior Director of Sales and Response for ServiceMaster Recovery Management, Michael Rivas, Executive Vice President of Risk Services for Marsh & McLennan Agency, Ian Cull, Chief Science Officer at ServiceMaster, and Mike Matias, Director of Powered Environmental Control for ServiceMaster. The discussion took place virtually on November 16, 2022 during the SHN Risk Summit. The article below has been edited for length and clarity.
Cal McCarty: Welcome everybody today to our risk panel. I oversee the commercial network and our risk response nationally for our clients and have with us today some of our partners involved in our response in the state of risk.
I want to introduce Michael Rivas. Michael Rivas is the Executive Vice President of Risk Services for Marsh & McLennan Agency, MMA and formally Assurance. Mike has been a great risk partner of ours and an absolute great mind when it comes to risk services. Not only responding and answering risk topics, but implementing and being a very pre-loss type of risk provider. Michael is one of the leaders in developing risk services for clients in the entire country.
Ian Cull is the Chief Science Officer of our indoor science, also a service master restore company. Ian and I work very closely on a lot of environmental issues and I think one of the coolest names in all of business, not many people out there are Chief Science Officer. Happy to have a Chief Science Officer on board with us today.
Our fourth panelist outside of myself is Mike Matias. Mike Matias is the Director of Powered Environmental Control for ServiceMaster Recovery Management across the country. We call Mike the ‘God of Power’ amongst other things. When you need something powered or lit up, Mike can do it in any state or fashion in any situation.
Without further ado, I want to start with Michael Rivas from Marsh, MMA. Michael, talk about a little bit about the trends in senior housing related to property insurance coverage, and what strategies, if any, should attendees employ to address these trends today?
Michael Rivas: I hate to be the bearer of bad news, but we’re seeing some increases when it comes to the property coverage. We’re starting to see insurance carriers take a stricter stance when it comes to their recommendations. For instance, historically, an insurance carrier would send out their loss control property inspector. They would do a walkthrough, they might give you a list of 10 different recommendations. Most clients could comply with one or two and be okay to satisfy the underwriters requirements.
What we’ve seen lately though, is the underwriters are really holding tight to some of those requirements because we’ve seen the expense in restoration for property increase significantly. A lot of this is being driven just by some of the catastrophes that have taken place and mainly wind and hail. You also have some of the flood and water damages. We have the wildfires in California and these costs are significantly increasing and some of the things that are driving that is shortage in labor. It’s harder to find people and when you do find them, they cost more money.
The material costs are going up significantly. If you take a look at Hurricane Ian, for example, that’s projected right now to cost $40 billion in damages. It’s $40 billion with a B, and I have heard some estimates going up to $65 billion, and so it’s significant. It’s no longer what the primary layer of insurance can cover, it’s also starting to impact the reinsurance companies.
Where reinsurance companies have never really had to worry about paying for property before in the past to this extent, they’re now starting to experience losses. Reinsurance rates are going up, and it just trickles down again. It is just a perfect storm, no pun-intended between the interest rates, shortage of labor, supply chain demands, the catastrophes, we’ve seen, it’s going to trickle down, and you’re going to see it impact your premium.
There are some things that we can do in advance. One, if you know that you happen to have an aging building, start funding and putting money aside for restoration. You’re going to want to work with your insurance agent to communicate all of the products or all of the strategies that you’re putting in place to the underwriter. Let them know that we did a flood resiliency assessment, and then here are the next three things we’re going to do over the following two years to address those exposures.
Anything you can arm your insurance agent with to take back to the underwriter, so that way they’re giving you more favorable quotes. That’s a great strategy. The other thing that you need to look at is possibly restructuring your insurance program, maybe before you had a very low dollar deductible, I hope you may want to consider taking on a higher risk. I mentioned that wind and hail were the primary loss drivers. We’re also starting to see some of the insurance coverages restructure where there’s a separate deductible for wind and hail damage.
We didn’t have that before. It was usually just grouped together. Those are things you’re going to want to talk to your insurance agent about. How can we restructure and be creative about it? I know it’s easy for me to say, “Put more money aside, spend more money on property insurance.”
It’s not that easy if you’re an owner or an operator. I get that. You’re also going to want to take a look at what are some other strategies that can drive down cost of insurance coverages elsewhere within the enterprise. For instance, are we doing our best to control the worker’s comp costs? Is there some restructuring on the worker’s comp or maybe we move to a larger deductible or a retro plan or something? Or we can shift some of those financial, the total cost of risk over the property side.
Professional liability, if you’re in a very litigious state such as Florida or Arizona, what are you doing to take advantage of the professional liability exposure to drive down those losses? If you’re in California, bad news for another professional liability, they just revised the whole microbit, which capped a professional liability loss, roughly around 250,000 that’s now been raised, and insurance carriers are responding accordingly.
California, you’re definitely going to want to focus on your professional liability, look at your documentation. Give your insurance agent not just your financial statements, but let them know what your risk service strategy is, so they can take all of this back to the underwriter and better represent you. Those are a few things that you can do.
McCarty: Ian, when you talk about environmental health and indoor air quality, I’m always worried about that, and our business is certainly in senior housing, senior living. Not only in the current state of all time, but pre-disaster, definitely post-disaster.
What are the top environmental health concerns that everybody should be looking for and worried about when it comes to senior housing? I’ll let you just touch on that from a broad perspective.
Ian Cull: That’s a great question, Cal, just about what are some of the top risks? We still have to be concerned about COVID, the flu, RSV, these respiratory viruses that aren’t going to go away anytime soon. We understand that primarily these can transmit through the air, and historically we didn’t really think of indoor air quality as having any type of effect on the flu or the cold.
Today, based on a lot of research that’s been done over the last three years, we’re in a much better place to understand that. I’d say COVID and other respiratory viruses are still a huge risk for senior living facilities. The reason is that one of the primary things a building can do is to provide proper ventilation and filtration. Historically, these buildings have been extremely underventilated, and often the filtration that you find in these buildings is quite poor.
I myself lost my grandfather who passed away from COVID in an assisted living facility. I have my theories, one of which is that the building was poorly ventilated and it used more of like a residential kind of an HVAC system, then a well-run commercial one. I would still put COVID really high up on the list. Another risk to be concerned about from an environmental health perspective would be Legionnaires disease. That’s when you might hear of a disease that is caused by bacteria you find in the water systems of buildings. Elderly are especially prone to these bacteria.
You may have seen it in the news recently, just maybe about a month ago. The headlines were about a New York City nursing home where five people died in the early fall this year, and throughout the year you hear stories of outbreaks and deaths. They often happen in assisted living or nursing homes because that bacteria really does target the elderly and can go from being just normal pneumonia to actually deadly pneumonia with people that have compromised immune systems.
Another thing I’d say, senior facilities who are really concerned about their water quality, which then leads to the air quality because these bacteria starts in the water, and then as someone takes a shower, it can become airborne, aerosolized, and people breathe in that bacteria that you could find in the pipes. That’s another big one. A third point I would say is just dampness, mold, moisture. That’s an issue in housing everywhere.
If you look at some national studies, you can just pretty much predict that over half of buildings have some type of water damage that’s occurring. That could be a roof leak, a leaking window, a pipe that’s dripping underneath the sink. These are issues that are just so common in buildings and when you have that event that can lead to mold that grows and then from there, mold can cause a whole host of health effects.
Some of the more traditional ones like asthma and allergies can impact everyone. There are special health concerns for people who are immunocompromised which could be the case in certain senior facilities where you can actually even get fungal infections, things like aspergillosis, which is a fungal infection of the lung.
The list actually goes on, and if you gave me a whole hour, I could just keep rolling. To be brief, I’d say some of the top three specific to senior facilities would be buildings that are poorly ventilated leading to transmission of respiratory viruses like COVID. Secondly, Legionnaires disease, which is an issue with typically water pipes. Then third, just dampness, mold, and moisture.
McCarty: Again, thank you very much for that and now we have some topics coming up that you can elaborate on that a little bit more.
Mike, a specific subject that we’ve seen, especially in senior housing, senior living, since Hurricane Irma is what they call Rule 58A or Code 58A, was specific to the state of Florida. After Hurricane Irma, there was no code or policy for not only backup power but backup cooling in a very warm state, very tragic. A lot of senior living facilities, senior housing facilities were not powered correctly and could not control their temperature and they lost some residents.
58A was put in place to make sure that folks had the right power backup. It was to code from a fuel source and could run X part of a facility mainly the air conditioning units and other code structures. Mike with the implementation of 58A in Florida the last couple years, what should our senior housing professionals be worried about in case that were to be implemented in code in all other 50 states?
This excerpt has been edited for length and clarity. To watch the full discussion on video, please visit:
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