Insurers and brokers are urged to prepare aged care clients for significant insurance and liability implications stemming from the incoming Aged Care Act 2024.
With the legislation taking effect from July 1, Gallagher has highlighted the need for comprehensive policy reviews and risk assessments as providers face expanded compliance requirements and potential exposure to civil penalties.
Under the revised act, aged care providers will need to demonstrate they have taken reasonable steps to prevent harm to care recipients.
Individuals in key roles – including directors, executives, and certain clinical leaders – will be held to a due diligence standard in ensuring the provider’s compliance.
Failure to comply could result in civil penalties, with fines of up to $1.58 million for corporate breaches tied to serious harm, and personal liability for responsible persons if oversight failures contribute to injury or illness.
“These increased regulatory requirements, duties, standards, and enforcement powers call for increased risk management measures to proactively identify, assess, and mitigate risks under the new act. These may include compliance monitoring, incident management and quality improvement processes, and strong contracting procedures,” Gallagher said.
Gallagher’s commentary aligned with recent guidance from Lockton, which emphasised the insurance implications for directors and officers (D&O) and statutory liability policies.
Lockton noted that as financial pressures mount – particularly from a shift to a cost-recovery regulatory model – some providers may find their D&O coverage insufficient, especially where insolvency exclusions apply.
It urged aged care boards to proactively engage with insurers to confirm policy limits and exclusions, particularly around regulatory enforcement and litigation costs.
Additionally, Lockton noted that with increased scrutiny from the Aged Care Quality and Safety Commission (ACQSC), providers may face higher premiums and narrower coverage.
Expanding into home care – an area being encouraged through new funding – also introduces unique risks, including staff safety in community settings and limited supervision, which may not be fully accounted for in existing policies.
While aged care faces structural changes, the strata management sector is also confronting potential disruption tied to remuneration reforms.
The New South Wales government is currently considering changes to how strata managers are paid for arranging insurance, including proposals to eliminate commissions.
PICA Group CEO Bobby Lehane compared the reform debate to the challenges seen in aged care, cautioning that if commission income is removed without a viable replacement, the financial viability of strata businesses could be compromised.
“The strata management sector has endured a sustained period of declining profitability and viability, so any significant changes to remuneration from insurance at this time represents an existential threat,” he said.
Survey data from PICA indicated a lack of consensus among property owners on the issue, with preferences split between maintaining commissions, adopting insurer-funded fees, or shifting costs to clients directly.
These sector-specific changes occur amid broader concerns around retirement adequacy and insurance literacy.
Research from MetLife Australia and Super Consumers Australia suggested that many Australians nearing retirement lack both a financial strategy and a clear understanding of the insurance included in their superannuation accounts.
A significant proportion of individuals aged 40 to 60 expressed concern that their superannuation savings will not last, with nearly 70% reporting uncertainty and around half admitting they have no structured plan for retirement.
