A report submitted to the Washington State Legislature examines the state of the liability insurance market for adult family homes in Washington, finding the market to be largely sustainable—but it does provide suggestions for increasing the appeal of AFHs to insurers.
Washington Insurance Commissioner Patty Kuderer’s office worked with a consulting firm on the newly released report, which was requested by the state Legislature in the 2024 session.
AFHs are licensed caregivers for up to six residents not related to the caregiver, or up to eight residents with specific approval. The are required by state law to maintain commercial general liability insurance and professional liability insurance.
The report examined 14,746 policies from January 2019 through September 2024. Coverage for AFHs in Washington comes from surplus lines insurers and risk retention groups, which are non-admitted carriers that cover the risks that the traditional market cannot cover.
It found an annual per-bed premium of $424 and a projected overall loss ratio of 40%, on the lower end of typical loss ratios. The annual per-bed premium ranged from $318 in 2019 to $473 in 2024, an increase the report said did not appear excessive based on industry information.
The report did not recommend a government-sponsored insurance entity as a policy option, but authors of the report provided suggestions on how to make the AFH market more appealing to a variety of insurers.
Challenges related to AFH liability insurance identified in the report include:
- Even small premium increases can disrupt owners’ tight budgets.
- A small number of AFHs are charged high liability insurance premiums. Roughly 5% of the policies had an annual bed rate of $900 or more, more than double the $424 average, but more than 80% of the policies had annual bed rates of less than $550.
- In some cases, AFH owners and licensees lack business management and healthcare experience.
The report offers issues for the Legislature to consider, including:
- Suggestions to make the Washington AFH market more appealing to a wider number of insurers, which could increase market competition and produce more competitive pricing.
- Improving education for AFH owners on insurance, risk management and business ownership.
- Considerations on the average daily bed rate paid to AFHs compared with other facilities.
Topics
Liability
Washington
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