Analysis: Retirement villages, an infant market

While not a common feature in the UK at the moment, retirement villages could become the care option of choice in the coming years

A generation of baby boomers is waiting in the wings, with high expectations and a desire to live in a good standard of home. Retirement villages, where residents rent or acquire their own property and then buy in whatever care services are required, are touted as an option of choice. And they are all going to need some form of insurance. 

Currently around 0.5% of over 65s live in a housing with care development. However, it is around 5% in Australia, New Zealand and the US, where the market is more established. That figure could be replicated in the UK.

With most residents at home all day, security within the complexes is tighter than the average residential development. Is this a golden opportunity to offer a tailored group contents product as part of a service charge? 

Michael Voges, CEO of Associated Retirement Community Operators, a representative organisation for housing with care providers in the UK, says there are two broad areas of opportunities for creating insurance products for this fast-growing market. 

“I strongly believe there is a market for discounted contents insurance for residents who live in developments that are permanently occupied and monitored. 

“However, there are currently no comprehensive insurance policies available that cover all the different aspects of operating a retirement village. Our members have to resort to ensuring their care services, buildings, housing management, leisure services, food and beverage operations separately. As these are borrowed from other sectors, they fail to take account of the reality of delivering these services in an integrated way. 

“A packaged offer would be welcomed by operators of retirement communities. As a trade association, we would be very happy to discuss developing bespoke insurance products for our sector with interested insurers or brokers.”

Voges adds that other countries are further down the line when it comes to creating combined packages, as their retirement community sectors are more mature.

In Australia, contents schemes specifically designed for residents of retirement villages are available. Apia offers a specific village cover plan that includes contents replacement, even for visitors. 

New Zealand broker Crombie Lockwood offers both buildings and contents insurance products. After 12 years of working in the sector, it has specialist brokers working solely in this area and has developed specific products to suit it. ‘The retirement village and care facility business is complex,” it notes. “To get the best insurance, you have to deal with someone who understands how your business operates and the legal agreements you have with your residents.’ 

In some serviced apartments in New Zealand, contents insurance is absorbed into the cost of the service charge, along with power and even food. 

In the US, while the buildings insurance is covered by the owner of the village, provision of contents insurance is solely down to the residents. 

Margaret Wylde, CEO of US retirement village consultants Promatura, explains: “In for-sale condominium buildings, the building insurance is paid by the condominium association and the homeowners’ association.” HOA fees include a proportionate share of the building insurance fees. 

“Individual homeowners would obtain insurance of the contents. They need to be sure what is included in the condominium insurance: some cover the entire building and some don’t cover the interior walls or built-in fixtures in the condominium.”

In the UK, there is an appetite for some form of group contents insurance, which could replicate the schemes already provided for social housing tenants. 

Ian Bostock, personal lines underwriting director at RSA, says the insurer could consider providing a home contents product for a group scheme such as a retirement village. “We already provide similar products on tenant contents schemes, so we do have experience in this area of home insurance and can create appropriate products to meet the needs of the customers of a particular scheme.

“A group scheme such as this would normally be dealt with through one of our affinity or broker partners, which would look to provide a contents product covering all residents of the retirement village. Schemes of this nature do frequently require the policy premium to be paid as part of the rent or service charge. 

“As always, the pricing of such a product would take into consideration the occupancy of the home and what proportion of time the homes are unoccupied due to holidays. We do recognise this is a potential area of growth in the UK and I am keen to see how the scheme model develops.

“Such a scheme must be well-managed and ensure value and cover that fits the specific needs of the residents if it is to fulfil its purpose.”

Craig Allen, head of home insurance at Ageas, agrees that group contents schemes for retirement villages offer a “real opportunity for insurers and underwriters”.  

“At the moment, there is a small gap in the UK market for such schemes, but we will quickly follow the learnings of our colleagues in other countries where these have been run successfully,” he predicts.

“Assessing the risk accurately and adequately is key when thinking of a retirement village contents scheme. Most properties in these developments are small, so the cover needed would also be relatively small. As a result, if residents were to buy individual policies, their premiums are most likely to be minimal but each would pay associated administrative costs.

“Offering all residents of a retirement village a block policy would remove this issue. Insurers and underwriters would be aware of the location, the approximate age of customers and average sum insured as apartments are very similar.

“However, we must not forget some accumulation risks when calculating the premiums, as perils such as flood or fire could involve multiple properties.

“We are very familiar with this kind of risk as we currently underwrite block contents policies for council tenants. We are very experienced in providing cover and service to the older age groups, so retirement village contents schemes would be a natural extension for us if the demand for such propositions increases.”

For the retirement village market, therefore, surely it is only a question of maturity.