The residential care sector is a highly fragmented part of the Healthcare Liability insurance market, with carrier interest and coverage availability largely dictated by the resident's specific needs and level of care, or "resident profile." This broad category encompasses a diverse range of facilities, from behavioral health centers and social service agencies to skilled nursing facilities and assisted living communities. The complexity of this sector makes it a unique and challenging space for both insurance providers and the facilities themselves.
Senior living, which includes assisted living and skilled nursing facilities, has been a major driver of the residential care insurance market. A significant shift occurred decades ago, pushing this segment out of the standard, admitted insurance market and into the more specialized Excess and Surplus (E&S) market. While there were some admitted or package options in the past, these options have become a rarity, and the E&S market is now the established norm.
The senior living market experienced a significant "hard market" period around 2017-2018, its first in over a decade of competitive conditions. This period, though seven to eight years in the past, had a lasting impact. Faced with a surge in large claim payouts, insurance carriers responded by severely restricting coverage forms to mitigate their own risk. This shift left many facilities with less-than-desirable coverage, often featuring higher deductibles, lower limits and more restrictive policy language. The challenge today is that many of these facilities are still operating under these limited coverage forms.
Transitioning from a restrictive, claims-made policy to a broader form isn't a simple process and can be particularly complex due to the "claims-made" trigger, which means that a policy only covers claims reported during the policy period, and changing carriers can create a gap in coverage for incidents that occurred in the past but are reported later. Even facilities with excellent performance records in favorable jurisdictions were forced to accept these constrained terms.
Signs of a Potential Market Shift
As of mid-2025, there are whispers of another potential market shift on the horizon. Claim frequency has rebounded to pre-COVID-19 levels, while claim severity continues to show a relentless upward trend, driven in part by social inflation and nuclear verdicts — exceptionally large jury awards. This combination of factors puts pressure on insurance carriers. As a result, now may be a critical window for residential care providers to review and broaden their coverage while the E&S market still has numerous players. The competitive environment, for now, provides an opportunity to secure more comprehensive forms before a potential hardening of the market restricts options once again.
Despite the challenges, the long-term growth outlook for residential care remains strong. The aging of the Baby Boomer generation, combined with increasingly retirement-ready Gen Xers, is projected to drive the senior living segment to grow by more than $130 billion annually by the end of the decade. Some estimates project the entire US long-term care market to reach $2.15 trillion by 2030, with home care services alone projected to be over $107 billion in 2025.
However, the industry is grappling with severe financial strains. The profitability margins are thin, and Medicare reimbursements are often inconsistent and can be a source of financial unpredictability. Furthermore, the residential care sector is in the throes of a national healthcare staffing crisis. With personnel costs rising steadily, providers are exploring innovative solutions to reduce their overall liability costs.
Regulation is another driving factor. Some mandates designed to improve patient care — such as the minimum nursing hours per resident — also create financial pressure. Carriers are becoming increasingly focused on the "acuity" of the residents — their level of medical need and complexity. The days of facilities serving a homogenous, low-acuity resident population are over. The acuity of residents that underwriters once expected to see in certain facilities is no longer the norm. In many states, the mix of who occupies beds within a single facility has shifted. While many care providers are meeting regulatory requirements, carriers now expect them to meet the standard of care for each individual resident's diagnoses. Do they have the appropriate level of care, risk management protocols and adequate staffing — in both quality and quantity — to avoid major incidents?
The Shift in Social Services
Beyond senior living, other key segments of the residential care marketplace are experiencing similar market dynamics. These segments include behavioral health facilities (substance abuse and mental health treatment), group homes for individuals with intellectual and developmental disabilities and facilities for at-risk youth. The admitted market serves these segments historically, but these segments now see the same migration to the E&S space that nursing homes experienced years ago.
The social services segment has become a particularly challenging area for Healthcare Liability insurance. Social services encompass youth, seniors, mental health, drug and alcohol addiction, foster care, adoption and residential housing. According to RPS Senior Vice President Margaret Jacobs, abuse claims are becoming more frequent in this segment. The increase in frequency of these claims has led the insurance market to react by limiting coverage options. As a result, policies with low costs and high limits — as well as occurrence-based coverage — are becoming less common. Many carriers are pulling out of the social services space entirely or shifting away from writing comprehensive package policies.
"If I had to guess which Healthcare Liability market is the most distressed these days, it would be social services," Jacobs says, "mainly because of the shock for insureds based on what their past insurance programs were and the options insureds are presented with today."
For Brokers, a Need for Transparency and Proactive Partnerships
In this evolving and demanding market, the role of the broker is more critical than ever. "Brokers need to make sure they're out ahead of the risks their clients are facing in residential care and fully understand the services being provided, the makeup of the patient population and how the facility is staffed," says Karen Bennett, senior area vice president, RPS Healthcare. "While we understand these providers are focused on patient care — as they should be — it's critical they're meeting with their producer early and partnering with someone who specializes in the healthcare space."
Jacobs also stresses the importance of transparency and early renewal discussions. "Transparency and strategy are critical," says Jacobs. "This is true for any line of coverage, but it seems that the social services accounts are more surprised than anyone else at renewal. Sit down, let them know what's going on in the marketplace so that they're not blindsided, and strategize a path forward with them."
A collaborative and strategic approach between the broker and the client is essential for navigating the changing landscape and securing a viable path forward.
Learn more about what's next for the Healthcare market in the 2025 Healthcare Market Outlook.
