The Retirement Industry - Reform, Innovation and Opportunity Ahead
The retirement industry has had its fair share of controversy and bad publicity in recent times, leading to the reform efforts currently being undertaken by the NSW government and most recently leading to the release of the Greiner Report.
While the Report focuses its recommendations on the retirement village sector specifically the broader health and aged care industry is also undergoing a transformation on the back of technology and increased competition.
What does the Report recommend, how will the retirement industry respond and what will it mean for service providers and residents alike?
At Kinny Legal we believe that regulatory reform underpinned by the Report’s recommendations, the advancement of technology and increased competition is creating considerable opportunity to deliver better experiences and more transparency to all stakeholders in the retirement village sector. In particular the end users and residents of villages and related aged care services stand to benefit most through concrete improvements around better transparency of retirement village service agreements as well as departure fees and payments.
The changing landscape and innovation is allowing new service providers to enter into the marketplace and offer a range of services and products that will compete with established industry players. Indeed the Greiner Report’s recommendations make it clear that the NSW government intends to foster this type of innovation and competition across the retirement village sector but inevitably this will have a flow on effects to service providers across the broader health and aged care industries. We see these changes arriving on three distinct fronts. Regulatory change, innovation and technology and increased competition.
Across the retirement village industry, there is an undeniable drive to improve the experience of residents through increased transparency and fairness. This was at the heart of the Greiner Report recommendations. The Greiner Report paid particular attention to industry practices and village contract terms pertaining to entry, pricing, ongoing service fees, reinstatement costs and departure fees.
If the Greiner Report recommendations are implemented by the NSW government, what might this new framework look like? In short, it’s all about offering residents more certainty around the costs associated with living in a retirement village while making key agreements as easy to understand as possible. Key recommendations in the Greiner Report included the following:
- Implementing a mandatory Code of Conduct to set the standard for retirement village operators and to stamp out unscrupulous behaviour;
- Introducing strong transparency measures to improve disclosure of key contract terms, exit fees, and to drive greater competition in the sector;
- Improved dispute resolution services for residents; and
- Measures to help clarify responsibilities with respect to ongoing maintenance costs.
So, what’s next? It’s clear the NSW government understands the need to respond to these recommendations. We expect ongoing responses over time resulting in significant legal and compliance changes that will need to be managed by retirement village operators and their respective legal teams. What this means for most stakeholders is the need to keep abreast of change and be prepared to respond accordingly.
Innovation and technology change
The range of new retirement village operators and technology start-ups targeting the industry continues to grow in line with our ageing population.
The good news for seniors is that many are also driven by the desire to provide more transparency to end-users, and new entrants are often more attuned to the increased expectations of seniors around the quality and efficiency of services within retirement and aged care facilities. Further, this push to innovate is driven by both technology and a desire to improve services, and is not unique to new entrants. It’s fair to say that innovation is being embraced by everyone from business, educators, industry groups and government. Some recent examples include:
- The University of Newcastle Futures Hackathon for Aged Care;
- InnovAGING investment initiative;
- groups like the Australian Centre for Social Innovation; and
- projects like IRT Group’s Driverless car.
These new approaches and initiatives will transform retirement village living by providing (amongst other things) improvements in security of tenure, connection, wellbeing and better co-living models.
While innovAGING is a great start, it is clear the industry will only see more investment as disruption takes hold. Existing retirement village operators and service providers who can ride this innovation wave will benefit from these changes. Those who do not will likely lose market share as new entrants more ready to embrace the changes on foot and more able to adapt more quickly than established industry players will have a competitive edge.
Regulatory and technological change brings increased opportunity for new entrants into the market. While change can be costly for industry stalwarts, this is not the case for new entrants. For innovators there is significant opportunity to differentiate themselves and steal market share. This increased competition will give residents new options to choose from, but it will also challenge the established industry to get better and deliver more value and quality to residents. The bottom line for all stakeholders is that reforms are coming, and you need to be prepared to adapt accordingly.
We see huge opportunity for the industry to grow and develop in ways that fundamentally improve the customer experience.
A reform process always offers an opportunity for change and innovation. How fast this happens will largely depend on how the industry responds and whether it adopts what is in effect a ‘blueprint for success’ – ie the Greiner Report recommendations. Will the established retirement village operators and service providers embrace these recommendations and ride the innovation wave, or will they do the minimum required to comply with new regulations and reforms? How will new entrants change the customer experience for seniors?
There are many questions around how to navigate this changing landscape, what it means for established industry players, and how innovators can make the most of this opportunity. Ensuring you are compliant with the reform agenda and also flexible enough to accommodate new changes will be critical for the success of service providers in the sector and both old and new.
This blog post does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to you. Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.