Across the United States, childcare providers are facing an urgent issue: liability insurance is becoming increasingly difficult—and costly—to obtain. Without it, providers cannot legally operate, threatening families’ access to safe, licensed care. While this crisis has gone unnoticed in some areas, it is quickly destabilizing the early childhood education sector.
What’s Behind the Insurance Struggle?
Liability insurance is essential for protecting providers from legal claims involving injury, negligence, or abuse. However, providers are encountering growing barriers:
- Rising Legal Costs: While the number of claims hasn’t dramatically increased, the cost per claim has. Legal fees, settlements, and reputational damage make providers high-risk to insurers.
- Limited Abuse Coverage: Coverage for abuse and molestation—crucial in child care—is often unaffordable or unavailable due to high premiums and exclusions.
- Fewer Insurance Carriers: Many insurers have exited the market, particularly in high-litigation states, reducing competition and driving up prices.
- Strict Licensing Requirements: Providers must carry specific coverage to maintain their licenses, creating a catch-22 when they cannot afford that very coverage.
Could Pooling Offer a Solution?
Public K–12 schools have long used insurance pooling—a risk-sharing approach that stabilizes premiums and broadens coverage. While rare in child care, pooling could offer similar benefits.
Why Isn’t It Common in Child Care?
There are structural and market-based barriers:
- The industry is fragmented, with many small, independent providers.
- There’s a lack of centralized oversight or coordination.
- Insurers may view the sector as too high-risk without uniform safety standards.
If designed thoughtfully, pooling could help providers access affordable coverage. Potential models include:
- State-Run Risk Pools: States could establish pools backed by public funds or reinsurance programs.
- Association-Based Co-ops: Child care associations could organize collective policies and promote shared safety practices.
- Network Models: Franchise and faith-based networks already use group coverage effectively and could serve as models.
Next Steps
To move forward, the sector needs:
- Feasibility studies to assess legal and financial requirements. Associations and state agencies can explore the legal, financial, and operational needs to establish a pool.
- Dedicated administrators to oversee pooled coverage.
- Standardized safety protocols to reduce insurer risk included but not limited to: staff training, incident documentation, supervision protocols, and facility safety standards.
- Seed funding through public or philanthropic support to launch and stabilize new pools.
- Education and advocacy to raise awareness and build support. Industry leaders and advocates should educate providers, policymakers, and the public about the insurance crisis and push for systemic solutions.
Final Thoughts
Childcare providers are essential to families and communities, yet they face mounting insurance barriers. Insurance pooling isn’t a silver bullet, but it could be one solution.
We are excited to share further resources and solutions to help childcare facilities with this insurance crisis – please join SEC for a free webinar to help protect your business and your bottom line. Learn more and register here!