Insurance threat for providers

Trigger warning – this article mentions physical and sexual abuse of people with disability. If you have been personally affected by this, please see the bottom of the article for resources for support.

Given the sensitivity of this topic, all research, conversations and comments to inform this article have been off the record, but information was gleaned from providers, brokers, insurers, and peaks

Recent years have highlighted the epidemic of abuse of people with disability. The Royal Commission has shone a light on the devastating personal and social costs of abuse. In this article, we discuss the challenges providers face in accessing insurance for physical and sexual abuse and the flow-on effect this is having on the supports that NDIS participants can access. But we would be remiss if we did not begin by stating what should not need to be stated: that the abuse of people with disability is the much greater injustice here. Insurance issues and the impact they have on participants are serious and need to be addressed, but looming over this topic is the greater tragedy of horrific experiences of abuse.

On the insurance issue, the problem is this: many insurers are withdrawing or heavily restricting coverage for physical and sexual abuse, specifically for providers delivering 1:1 overnight supports in the participant’s home. With no insurance coverage for some services that participants need, affected providers are scrambling to make painful decisions – do we still deliver the supports uninsured? And if we don’t deliver the supports, what does that mean for the people with disability who rely on it? Adding to the problem is that this issue is often only uncovered at insurance renewal time, which means many providers are sleepwalking into an enormous governance risk.

As far as we can tell from our conversations with providers, insurance brokers, and insurers, this issue extends across every state and territory. It applies to registered and unregistered providers. And your NDIS Commission audit probably would not have picked it up as a risk.

But as with many things, the actions of insurers are only the tip of the iceberg here.

First, let’s take a step back and briefly examine the different parties involved, so everyone is clear on who does what:

Providers – deliver NDIS services and supports to participants.

Brokers – offer expert advice and guidance to providers to help them find the best insurance coverage, and meet the insurer’s needs.

Insurers – assess risk, set appropriate premiums, develop products, and ultimately provide insurance coverage to providers. Insurers are the ones who pay out in the event of a claim, and those costs can be significant (covering legal and defence costs, as well as any actual settlements).

Physical and Sexual Abuse (PSA) coverage – this can refer to different things with different insurers but usually means coverage for any financial claims made against a provider when physical or sexual abuse has occurred. PSA is still available to providers, but its coverage has been restricted in many situations.

What’s happening with insurance?

The problem of providers being unable to find insurance coverage appropriate to their supports became more prominent earlier this year, although the issue has been on insurers’ radar for several years. All providers choose their level of insurance coverage – that is a business decision, and PSA has been a relatively common coverage that many find fundamental to the effective financial governance of a provider. There seem to be some consistent themes in what brokers, insurers, and providers have told us in recent months:

• The issue only emerges at renewal time, so it often blindsides providers. Some providers have said that they walked into the annual meeting expecting to renew their existing insurance and walked out with effectively no PSA coverage for 1:1 overnight supports. This is often a result of insurers updating their forms or questionnaires to dig deeper and ask for more granular information on the specifics of support provided.

• The withdrawal or heavy restriction of coverage seems to apply mainly to 1:1 overnight supports in the participant’s home. Group arrangements or situations with more than one worker on shift and supports during the day often don’t face the same insurance restrictions. This is odd because abuse doesn’t only happen on overnight shifts!

• Many insurers are saying that risk mitigation and management approaches won’t change what they will cover. In many cases, the insurer is saying, “we understand that you recently passed your NDIS Commission audit with flying colours, have never had any previous claims, and have a sterling reputation with lots of policies and procedures...but we still can’t provide insurance coverage for PSA on your 1:1 overnight supports”, which makes it very difficult for providers to respond with appropriate risk management strategies.

• There’s been no specific cause identified for this widespread withdrawal of insurance. This seems to be a slow adjustment of coverage that has recently picked up speed. There are general and wide-ranging industry fears about ineffective sector safeguarding standards, loose registration requirements, high-profile cases like the abuse of Ann Marie Smith, and the role of the Royal Commission in rightly shining a light on abuse, but no single or dominant factor can be attributed to the change in approach from insurers. Insurance companies seem particularly concerned about retrospective claiming. These claims are often (again quite rightly) high in value to reflect the significant scope and impact of abuse, and it’s very difficult for actuaries to set premiums today to reflect these potential future costs.

We should be clear that some providers have managed to find coverage for PSA for 1:1 overnights, and that PSA coverage is still available for many other activities. But it’s getting harder and harder to find coverage, and brokers report having to look further afield. One insurer reported that this is particularly true for providers that haven’t taken what they might view as a very active stance in addressing physical and sexual abuse. In this case, PSA coverage for 1:1 overnights will be more a case of “we can’t offer this coverage to a provider with inadequate risk management controls” rather than “we can’t offer PSA coverage at all”. Insurers have also told us that past success is no indicator of future success in safeguarding (and retrospective claims means that apparent past success might not be the complete picture) and that a tokenistic policy on preventing abuse is no longer enough. Many insurers still offering PSA coverage for 1:1 overnights are now not only looking for the existence of procedures but also testing their effectiveness, which can only be a good thing.

What about impact?

The potential impacts of a lack of insurance coverage for PSA in 1:1 overnight supports are significant for a number of parties:

• Providers that can’t obtain insurance coverage for specific services may decide not to deliver those supports. This would force participants to choose between paying double the costs for 2:1 overnights (and rapidly blowing through their plan funds), moving out of their current living arrangement into a group setting, or going without overnight support.

• If providers decide to deliver this support anyway and later have a substantiated PSA claim against them, the financial consequences could be severe, with smaller providers at risk of going out of business.

• The NDIA has grand plans for more flexible, individualized, community-based home and living supports. If providers can’t obtain insurance coverage for those supports, then it’s not reasonable to expect the market to deliver them. Market failure, where providers feel unable to deliver supports that do not have appropriate insurance coverage, is another injustice for people with disability who might be relying on that support to live the life they want.

• We want diversity in the market, and I don’t know anyone who would be willing to risk putting a new business in such an exposed position by offering this vital support.

The removal of coverage is a logical response by insurance providers that need to protect themselves, but it doesn’t make participants any safer. However, let’s not put this at the door of insurers – they are only responding to changes in the market, the sector, and community expectations. Safeguarding failures are rarely down to a single break in the chain and are everyone’s responsibility. This change is potentially disruptive for providers and participants but scapegoating the insurance industry isn’t the answer.

The real problem

As I mentioned at the start, we all know that insurance coverage is not the real story. While it is true that participant choice and control will be affected by limitations on what providers can get insured for, we can’t ignore that physical and sexual abuse of people with disability is an ongoing and devasting issue in itself that providers need to address (not just be insured against). Insurance is simply the safety net of a robust and effective quality and safeguarding system.

Expecting providers to operate as commercial entities, which makes them subject to the decisions of the insurance industry, is one of many unintended consequences of the move from block funding to the NDIS. From the insurer perspective, why should the commercial insurance sector absorb the costs of the failure of providers, the sector, and the community to keep people safe?

This is much deeper than an insurance or compliance issue.

The most powerful thing providers can do is take more action to stop abuse from happening, acknowledging that safeguarding is much, much more than risk assessments and policies (as Jess covered so clearly last year). Talk with participants about sex, relationships, what makes them feel comfortable and uncomfortable, safeguarding, who to go to for help, and so on. And give workers the cultural and structural freedom to support these conversations.

What else can providers do?

In addition to that safeguarding work, providers can also:

• Have a tough conversation with your insurance broker as soon as possible - ideally yesterday, if not sooner. Some brokers have been proactive in contacting providers and warning them about this change in coverage, while others haven’t. Consider getting quotes from other brokers.

• Explore other options with your broker – what kind of risk management strategies might move the risk for the insurer from “unacceptable” to “acceptable”?

• If it’s a steadfast “no, we won’t cover that anymore”, ask your broker or insurer to explore other insurance products that might lessen the impact of any future claims. Things like Directors Liability Coverage and Legal Expense Coverage might not provide a like-for-like level of insurance protection but could help soften the blow in the event of a claim. However, you’ll still need to go through these products with a fine-tooth comb to make sure they give you what you need.

• We’ve also had isolated feedback that escalating the issue to a more senior person at the insurance provider has worked for some providers, so be prepared to do that.

• In the past, some state governments have run insurance schemes specifically for the disability sector. If you are seeing restrictions in insurance coverage, contact your state member and ask for help. In other sectors, State Governments have covered the insurance gap in the short term.

• The Federal government also has a role to play here, so ask your federal MP for help (an interjurisdictional working group has been established involving a number of States and Territories). If the NDIA wants a responsive, flexible industry with choice for participants, they need to support the sector on matters like these. To be clear: nobody is asking the Agency to write any cheques for providers, but there are other ways the Federal government can support the sector. There are a number of possible solutions, and the Federal government has a significant role to play in all of them.

• Part of the role of third-party auditors should be to highlight significant governance concerns like this. We get lots of informal feedback that some auditors contracted by the NDIS Commission have little practical knowledge of contemporary disability support provision. So, the Commission recruiting a panel of auditors with more sector-specific knowledge would help identify gaps in how providers prevent abuse.

Let’s reframe this – this isn’t just the insurance industry removing or restricting PSA coverage. It is the manifestation of decades of the government, sector, and community having inappropriate safeguards in place. So this is actually an opportunity for the sector to rethink how we safeguard, for governments to support the sector in doing just that, and for insurers to reflect a safer environment in their coverage decisions. Insurers are at the end of the chain, not at the start.

There is currently no system-wide response to this looming threat to choice and control. So, if you’re having problems getting coverage, make your voice heard on the short- and long-term supports you require. This has snuck up on many providers, but now is the time to respond – if something doesn’t change, the impact on fundamental parts of the NDIS will be huge.

If you’ve been personally affected by anything mentioned in this article, we encourage you to reach out to the resources below for support:

• Blue Knot has received funding to support people affect by the Disability Royal Commission: 1800 421 468.

• Beyond Blue has some great resources.

• 1800RESPECT has an app designed to support people with disability who have experienced abuse

• 24-hour support is available by calling 1800RESPECT, the National Sexual Assault, Domestic Family Violence Counselling Service (1800 737 732), Lifeline (131 114), National Disability Abuse and Neglect Hotline (1800 880 052), or Qlife (1800 184 527).

• Online chat options are also available by going to 1800respect.org.au or lifeline.org.au.

• Disability Advocacy Network Australia has collected a list of resources from across the country

• Knowmore is a free, independent legal service providing advice to survivors of institutional child sexual abuse.