What share of revenue should insurance be for a senior living operator?

Three variables dominate the number and none of them are efficiency. Care setting, because skilled nursing and memory care carry materially higher rates per bed than independent living. State and venue, because claim environment drives severity pricing. And program structure, because an operator carrying a large tower with defense outside the limit will spend more than one carrying a thin tower with defense inside it, and the second one is worse protected rather than better managed.

An operator comparing its percentage against a peer without normalizing for those three is comparing two different questions.

Total cost of risk rather than premium. That means premium plus retained losses plus collateral cost plus claims administration plus the internal cost of risk management. An operator that reduced premium by raising the retention has not reduced cost of risk; it has moved it into a less visible line.

Then compare cost of risk per occupied bed per year, segmented by care setting, and track your own number over time. Your own trend is the only comparison that controls for the variables that matter.

And compare structure explicitly: defense inside or outside, abuse sublimit as a share of limit, aggregate basis, and total limit. Two operators with the same percentage of revenue can be buying very different things.

Present it as three lines rather than one: premium, expected retained loss, and everything else. That framing makes a retention increase visible as a transfer rather than as a saving, which is the conversation most boards are not having.

Then show the limit alongside it. A board approving an insurance budget without seeing the limit is approving a cost without seeing what it bought, and the limit is the number that decides whether a bad year is survivable.

Liability cost per bed in this sector has been rising faster than revenue per bed for several years, driven by claim severity rather than by frequency. That means the percentage of revenue is drifting upward across the sector, and an operator whose percentage held flat may simply have bought less protection.

Read a flat line with suspicion. Check whether the limit, the abuse sublimit or the defense treatment changed in the years the percentage held steady.