In this guest post, Lyle Steffensen – Practise lead at Marsh Care Solutions, shares her views on what aged care board members and executives need to be considering post Royal Commission and as a result of the pandemic.
Directors & Officers Liability (D&O) insurance is the key protection mechanism for governors of aged care providers, providing cover for actual or alleged wrongful acts in managing an organisation.
The insurance market in Australia has hardened for the first time in 20 years with a focus on Directors & Officers Liability, Medical Malpractice and Public Liability insurance. These policies will be most affected by the handing down of the final report from the Aged Care Royal Commission.
The 2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services caused many insurers in Australia to put Royal Commission exclusion clauses into policies, and significantly increase D&O premiums and excesses payable. According to Marsh’s Global Index Report, Financial Lines premiums increased 51% in Q4 2020 in the Pacific region.
The Royal Commission into Aged Care Quality and Safety’s final report, delivered on 26/02/2021, included 148 recommendations in an extensive plan to overhaul Australia’s aged care framework. The report called for stronger governance and prudent regulation of the quality of care. Aged care providers would be required to be accredited against the new standards.
2020 was a difficult year for the aged care sector, and 2021 is shaping up to be just as challenging.
The combination of extreme media attention as a result of the pandemic, the ongoing focus of the Royal Commission, increasing insurance costs alongside reduced cover, could mean providers may have to make difficult decisions in order to remain viable.
Aged care providers’ board and executive must carefully review:
- The board’s own governance risk (assessing the correct mix of qualified and appropriate board members to meet the new standards)
- The executive’s ability to manage in a way that meets accreditation, maintains the business vision and provides dignity and safety for its residents, families and staff
- The pandemic response, operational and clinical risk management frameworks required to support the effective running of the facility; and
- The medium-to-long term financial sustainability of the organisation.
Insurers want to see that the aged care sector has addressed these risks by undertaking substantive change at the highest level where needed, and can provide quality submissions well ahead of renewal, to obtain the best terms possible in a difficult insurance market.
Marsh’s Advisory Consultants specialise in all aspects of governance risk and work closely with the broking team to ensure a cohesive, comprehensive and well laid out plan for the provider. This plan can also be used to obtain an optimal insurance renewal outcome.