OLYMPIA, Wash. — A report submitted to the Washington State Legislature (PDF 10.20MB) in late June details the state of the liability insurance market for adult family homes in Washington, finding the market to be largely sustainable but providing suggestions for increasing its appeal to insurance companies.
Washington state Insurance Commissioner Patty Kuderer’s office (OIC) worked with Davies Actuarial, Audit & Consulting on the report, which was requested by the Legislature in the 2024 session.
Adult family homes (AFHs), as referenced in the report, are homes with licensed caregivers for up to six residents not related to the caregiver, or up to eight residents with specific approval. These homes, which serve approximately 15% of Medicaid long-term care clients, are required by state law to maintain commercial general liability insurance and professional liability insurance.
The report analyzed data on 14,746 policies from January 2019 through September 2024, finding an annual per-bed premium of $424 and a projected overall loss ratio of 40%. That’s on the lower end of typical loss ratios, according to the report, with rates the report said “do not appear unreasonable.”
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.
Given those figures, the report did not recommend a government-sponsored insurance entity as a policy option. Instead, it provided suggestions on how to make the AFH market more appealing to a wide variety of insurers.
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.
“Although we understand that many AFH owners are working on very tight budgets, the figures above do not appear to indicate an availability or affordability insurance crisis on the whole,” the report states. “Rather, they indicate that the insurance market perceives certain types of AFHs or their residents to present greater risk.”
The key challenges related to AFH liability insurance:
- Even small premium increases can disrupt owners’ tight budgets.
- A small number of AFHs are charged high liability insurance premiums. Approximately 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.
- Residents want to age in place, which can increase risk management costs.
- In some cases, AFH owners and licensees lack business management and healthcare experience.
The report presents a set of considerations for the Legislature, 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 current and potential AFH owners on insurance, risk management, and business ownership.
- Considerations on the average daily bed rate paid to AFHs compared with other facilities.
- Suggestions on certain DSHS administrative items.
The Legislature convenes for its 2026 session on January 12, 2026.