CQC’s Impact on Insurance – what is it and how can you manage it?


At McClarrons, we deal with all types of general insurance but we have several niche areas, such as social care, in which we specialise and are able to offer some real expertise. What makes us significantly different to other care insurance providers, is the training our Care & Charity Team receive – sector specific training from “outstanding” CQC rated care providers gives us a real understanding of our clients’ concerns and responsibilities, enabling us to provide tailored solutions. We also spend time educating ourselves on the latest changes in the social care industry so we can stay up to date with the latest regulations and concerns of the sector.

Here, we outline how the insurance landscape is changing as we enter a hard market, on top of the impact of the Covid-19 pandemic and how a Care Consultancy could help.

Insurance Landscape Pre-Covid

Pre-pandemic, the insurance market for care homes and domiciliary care providers was a fairly small and niche sector. Having said this, care providers were able to choose from a number of package products offered by a number of brokers or directly via insurers. Products had a varied risk appetite – some products were designed and priced specifically for elderly residential risks whilst others were aimed at more complex needs.

As well as looking at the business activities, underwriters would also naturally record detail on the business financials, property, loss history and sums insured.

Underwriters also paid special attention to the latest CQC or Care Inspectorate Inspection Report; if all 5 KLOE’s were GOOD/OUTSTANDING, underwriters were comfortable with the risk. Should a service REQUIRE IMPROVEMENT, underwriters would typically still be happy to quote so long as an action plan was provided by the client to show the improvement they had made/were looking to make to their services.

Should a provider fall into the unfortunate situation of being rated INADEQUATE, the existing insurer would typically still offer renewal terms subject to sight of an action plan; however, any discounts would typically be removed, resulting in an increased premium. Equally, some markets would still consider a new risk rated as INADEQUATE subject to the full back story.

Insurance Landscape Post-Covid

So, what has changed since the pandemic? Well, the unfortunate truth is, for the most part, insurers have traditionally struggled to profit from care business, mainly due to the frequency and severity of liability claims.

Covid-19 has heightened concerns of liability claims potentially becoming more frequent; allegations that a person contracts Covid-19 or suffers a related injury due to a breach of the duty of care/negligence by the care provider, is a major concern.

Insurers will no doubt want to defend such claims but this may be tricky given the Government’s action and advice, which has been well documented in the media:

  • Inadequate provision and guidance regarding PPE
  • Inadequate provision of testing
  • Inadequate provision/distribution of emergency funding
  • Inadequate instructions on hospital discharges into care homes

Building a defence to potential claims could be problematic as, even if defended, there would be a cost involved.

Reinsurance is also an issue. Reinsurance is insurance purchased by an insurance company from another, to insulate itself from the risk of a major claims event. Effectively, the insurer passes on some part of its own insurance liabilities to the other insurance company. Now, reinsurers are reluctant to take on Public Liability in high-risk occupations such as care and hospitality, meaning insurers are increasingly having to front the potential cost of all claims themselves.

Due to the potential exposure for heavy losses, this niche marketplace has shrunk further, with some insurers exiting the market altogether and others no longer quoting new business. This has led to some providers having to renew with their existing insurer simply because no alternative is available.

It is also worth knowing that insurers have a reduced risk appetite for services aimed at the elderly; furthermore, they are limiting, if not excluding, pandemic-related risk from material damage, business interruption and liability (other than Employers’ Liability) sections of cover.

Providers may also be experiencing delays with terms being offered as underwriters are having to look at cases on an individual basis. This is due to the risk appetite shrinking, meaning that anything falling outside the new restricted appetite is having to be referred and signed off on a case-by-case basis, which naturally takes more time.

Underwriters also have a more detailed focus on Inspection Reports now; if you are rated GOOD/OUTSTANDING then there should continue to be no issues. If, however, you fall into REQUIRES IMPROVEMENT/INADEQUATE, providers will have to evidence the below to allow underwriters to assess the risk:

  • Results from last 2-3 inspection reports – underwriters will be looking for any trends or common themes
  • Action Plans and whether they have been fully implemented
  • CQC comments on the Action Plan and its implementation
  • Whether there has been no improvement from previous inspections
  • How things are different this inspection
  • Other than the Action Plan, what the business has actioned to safeguard residents, staff and the business more widely
  • Risk Management, more specifically regarding infection control

Insurance Benefits of utilising a Care Consultancy

Here, we outline the benefits of using a Care Consultancy, like Care Improvement Associates, when it comes to insurance. For this, we will break this down into two groups: those who have or are using a consultant and those who are not.

If you have been using a consultant for assistance with regulatory improvements, interim management or consultancy, you should let your insurance broker know. There is no better time to share this additional risk management information with them; it could help them access additional markets, secure discounts, agree additional policy coverage or gain lower excesses for you.

If you are not utilising the services of a consultant or are considering it, some of the benefits underwriters see in care providers using an independent consultancy firm are set out below:

  • It demonstrates a commitment to risk improvement
  • Provides an independent review of the business and its activities
  • Demonstrates investment and commitment within the business
  • Identifies a third-party who are able to work with your broker/insurer in your interest
  • Demonstrates additional risk management, such as: interim management/training/policies procedures/communication
  • In certain circumstances, they can assist with claims defensibility
  • Demonstrates a positive attitude and culture towards improvement
  • Provides evidence-based risk management

One of the most common questions we receive is: “If I use a care consultancy firm, will I get a discount on my insurance premium?”

The answer is that discounts to insurance is a long-term goal. Initially, in the hard market we find ourselves in, insurers are less likely to be able to provide an additional discount but in the current climate, utilising a consultancy could be the difference between an underwriter quoting or not quoting.

Let’s discuss this further…

McClarrons were working with a client whose insurer cancelled cover mid-term on grounds they were failing to comply with regulatory standards, falling into INADEQUATE on their latest inspection. An added complication was that when looking for new cover, we had to disclose that the prior insurer had come off cover mid-term, which is always considered a “red flag” to underwriters and falls outside of standard risk appetite. This leaves the client with a big problem should they be unable to source insurance elsewhere.

Working with the client’s consultant, we were able to demonstrate additional risk management, outside of their action plan. This provided underwriters with some security that a commitment to improve was being demonstrated and on that basis, McClarrons were able to secure terms for the client.

We appreciate times are hard and funds are tight but if you are able to contract with a good care consultancy firm, the long-term benefits will far outweigh the costs. Improved CQC ratings can help secure more than just insurance, it can help attract private clients and staff alike. Interim management could help your business grow in new areas, create efficiencies, and add experience to develop your own staff.

Seeking out a care consultancy firm should not just be looked at as a reactive strategy to a CQC inspection report, they can add value and support to your business in many ways. What’s stopping you from dropping an email or a call to find you how they can support your business? After all, it costs nothing to have a conversation.

If you would like to explore the benefits of Care Quality Consultancy further, we would highly recommend reaching out to McClarrons’ Care Network Partner, Care Improvement Associates Ltd. You can email Director of Operations, Rachel Bryan, at rachel@theciagroup.co.uk or call 01723 374620 for a free consultation.

More Stories