Underinsurance as a strategic risk in complex care organisations

For corporate care groups, insurance is often viewed as a hygiene factor. It is procured annually, benchmarked commercially and filed away as a cost of doing business.

In reality, underinsurance represents one of the most significant unrecognised strategic risks facing complex care organisations.

Unlike operational risks, underinsurance remains invisible until a major incident occurs. When it does surface, it can materially affect financial performance, asset values and stakeholder confidence.

Why underinsurance is a board level issue

Underinsurance is rarely the result of poor intent. It is usually the consequence of organisational growth, service diversification or structural change outpacing insurance disclosures.

As care groups scale, risk profiles become more complex. Multiple sites, varied service models and differing resident needs all introduce exposure that standardised insurance arrangements can fail to capture accurately.

At corporate level, even small disclosure gaps can have disproportionate consequences when applied across a portfolio.

The changing insurance landscape

The insurance market is evolving rapidly. Insurers are applying greater scrutiny to large care risks, particularly at claims stage.

Inflation has driven significant increases in reinstatement costs. Labour shortages, material pricing and professional fees mean historic valuations often no longer reflect reality.

At the same time, insurers are adopting a firmer stance on non disclosure. Assumptions that cover will respond flexibly are being replaced by stricter policy interpretation and reduced tolerance for inaccuracies.

For corporate care groups, this creates a clear governance challenge.

The impact beyond the claim

When underinsurance is identified, the consequences extend far beyond the immediate loss.

Reduced claim settlements can affect EBITDA, disrupt cash flow and create unplanned capital expenditure. In some cases, asset values may need to be reassessed which can impact lending covenants or investor confidence.

There is also a reputational dimension. Stakeholders increasingly expect robust risk governance across all areas of the business including insurance strategy.

Insurance as part of enterprise risk management

Leading care organisations are reframing insurance as a strategic risk management discipline rather than a transactional purchase.

This involves aligning insurance structures with operational reality, growth strategy and future service delivery plans.

Regular insurance reviews should sit alongside property strategy, clinical governance and financial planning. Changes in care models, resident dependency or site usage should automatically trigger insurance consideration.

This approach enables boards to treat insurance as a control mechanism rather than a reactive safety net.

A more strategic approach

For corporate care groups, the question is no longer whether insurance is in place. It is whether insurance remains fit for purpose as the organisation evolves.

Those who embed insurance into wider risk governance frameworks are better positioned to manage uncertainty, protect asset value and maintain resilience in an increasingly scrutinised sector.

Underinsurance may be silent but its impact is not. Strategic oversight ensures it remains a risk that is managed rather than discovered too late.