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Aon says liability costs stable nationwide in long term care industry

New research on liability in the long term care industry conducted by US-based Aon Corporation has revealed that liability costs are stable on a national average basis.

The Long Term Care 2008 General Liability and Professional Liability Actuarial Analysis, with the endorsement of the American Health Care Association, utilized data representing 15% of the total number of long term care beds in the US.

The study has found that average general liability and professional liability loss costs nationwide are at approximately $1,460 per bed after peaking at $2,030 per bed in 1998. This trend is driven by a reduction in the average severity of claims from a high of $261,000 in 1998 to $138,000 in 2007.

In addition, the number of claims (frequency) has stabilized in recent years, hovering around 10.6 claims per 1,000 occupied beds after rising from 6.7 claims in 1997.

Of the profiled states, Alabama, California, Massachusetts, Ohio, Pennsylvania, Tennessee, and Wisconsin showed increasing loss cost levels. Other states, including Arkansas, Florida, Indiana, New Jersey, Texas and West Virginia, exhibited stable or decreasing loss cost levels.

Liability costs dropped significantly in states that passed tort reform in the last several years. As a group, the average loss cost of these states dropped from $7,190 in 1998 to an estimated loss cost of $1,230 in 2005. The loss cost for these states increased only slightly through 2007 to $1,270.

High cost levels persist in Arkansas, California and Tennessee, where loss costs per occupied bed are multiples of countrywide averages. At $5,460, Arkansas has the highest loss cost of any state.

In all other states, excluding the 13 states profiled, the study found that loss costs peaked in 2002 and have increased slightly since 2005. The analysis of claims in all other states indicates that loss costs have risen from $630 in 1997 to $1,260 in 2007.

The Long Term Care 2008 General Liability and Professional Liability Actuarial Analysis represents data reported from 37 long term care providers operating around the country and approximately 20,300 individual non-zero claims from long term care facilities.