FAIR Plan Improvements Are on the Way

These improvements are part of a major modernization effort of the FAIR Plan that Commissioner Lara announced in July. The FAIR Plan is expanding its commercial plan with coverage up to $20 million per building, with a total aggregate of $100 million per location, and this new high-value program is expected by mid-2025. This new coverage option is needed now while reforms take effect to restore competition in the commercial insurance marketplace.

Commissioner Lara’s action has support from groups representing homeowners’ associations, supportive housing providers, farmers and ranchers, and builders, and many others.

California Farm Bureau President Shannon Douglass: “The California Farm Bureau applauds Commissioner Lara's efforts to modernize the FAIR Plan. Our farmers and ranchers have been disproportionately affected by the limitations of the current system, especially in high-risk wildfire areas. The increased coverage limits and enhanced financial stability measures will provide much-needed security for our agricultural community, ensuring that farms can recover and thrive after disasters.”

Kieran Purcell, Chair of the Community Associations Institute – California Legislative Action Committee, representing homeowners and condo associations: “The modernization of the FAIR Plan is a significant and much-needed step forward. As an organization representing community associations, we have long faced challenges in securing adequate insurance coverage due to outdated limits and lack of options. Commissioner Lara's initiative to increase coverage limits and improve financial oversight helps our communities find the protection they need against potential catastrophes. This reform is an important step toward providing stability and peace of mind to homeowners and associations alike, making it a long overdue but very welcome change."

Dan Dunmoyer, President and CEO of the California Building Industry Association: “The California Building Industry Association fully supports the modernization of the FAIR Plan. For builders and developers, securing adequate insurance coverage has been a persistent challenge throughout the state, particularly in high-risk areas. Commissioner Lara’s initiative to increase coverage limits and enhance financial oversight provides the necessary assurance that our projects and investments are protected. This reform is not only beneficial but long overdue, paving the way for continued growth and development in a more secure and predictable insurance market.”

Michael Miiller, Director of Government Relations for the California Association of Winegrape Growers: “FAIR Plan is often the only insurance available for the winegrape growing community. Our industry has been severely impacted by wildfires and the lack of adequate insurance coverage has hindered growers all over California. The Department of Insurance and FAIR Plan coming together for these improvements is crucial to ensuring that insurance remains available in the marketplace.”

California Association of REALTORS President Melanie Barker: “The California Association of REALTORS® supports the Commissioner’s work to update the FAIR Plan. REALTORS® work every day with clients struggling to get the insurance they need, and the actions of the Insurance Commissioner to increase access to insurance coverage options is vital.”

Mike Stillson, Board Chair for California Collaboration for Youth: “For us, it’s all about the kids. Today’s action by Commissioner Lara allows us to keep our focus on ensuring young lives in housing programs are safeguarded from unforeseen setbacks, providing stability and security as they build their futures. Thanks to Commissioner Lara's modernization of the FAIR Plan the state will be taking a step forward in ensuring the proper insurance coverage for all of our communities.”

Here are answers to questions about the changes coming to the FAIR Plan:

What does the new high value commercial policy cover?

Commissioner Lara’s previous mandate to increase FAIR Plan coverage was a big step in providing needed coverage, especially given there had not been a coverage increase for decades. But some businesses and community associations need higher coverage. The new high-value commercial policy provides $20 million per building coverage, with a total aggregate of $100 million per location. This helps those that need added coverage beyond what the FAIR Plan provides today during this time while the reforms from the Commissioner’s Sustainable Insurance Strategy to fix the state’s overall insurance market take effect. In 2019, Commissioner Lara ordered the FAIR Plan to double its coverage limit for residential properties to $3 million to account for increased home values and building costs and, in 2023, he reached an agreement with the FAIR Plan to increase its standard commercial coverage limit to $20 million per location.

How soon can policyholders expect to get the $20 million per building commercial coverage from the FAIR Plan?

The Department will push to have this FAIR Plan coverage available as soon as possible. The FAIR Plan issued a new “plan of operation” in August, and will need time to prepare and submit a filing, which the Department will review to make sure the rates charged are fair and adequate to cover expected claims. Increased limits will likely be available on or about July 1, 2025.

Why is there a three-year sunset on the new high-value policy?

The program will sunset on or around December 31, 2028. Policies entered into by the sunset may continue in effect for one additional year, or until roughly December 31, 2029. The sunset period ensures sufficient time to find a policy in the voluntary market, which should be willing to write high-limit commercial risks after implementation of the Commissioner’s Sustainable Insurance Strategy.

Why is the FAIR Plan required to report performance data to the public?

As a private association of insurance companies created by the Governor and Legislature several decades ago, the FAIR Plan needs to be accountable to the public it serves. Greater transparency is needed for regulators and public policymakers to track progress toward reducing FAIR Plan policies and monitoring the FAIR Plan’s financial health including regular reporting of FAIR Plan policy counts for both residential and commercial lines, wildfire risk scores, insured value of all structures, written premium, and other important measures.

How do changes protect consumers and the solvency of the FAIR Plan?

The FAIR Plan contains high-risk policies and maintaining its solvency is essential for paying future claims. While the FAIR Plan hasn’t had a solvency crisis in 30 years, we are taking no chances. The changes will strengthen the FAIR Plan’s financial reserves and backstops so it can fully and expeditiously pay all future claims from consumers. Before these changes, insurance companies could pass along 100% of the costs to Californians in an extreme worst case loss scenario. The Department has released a Bulletin outlining procedures to insurance companies that shield Californians from paying the full cost. In a major disaster, the FAIR Plan will pay out all of its retained earnings, reinsurance, and other backstop funds first. Insurance companies and consumers would share any additional costs up to $2 billion, and the Insurance Commissioner must approve any assessment on policyholders before they pay anything.

Before you get a FAIR Plan policy, you should shop the market. Please see our Top Ten Tips for Finding Residential Insurance. 

If you need to get a policy through the FAIR Plan, contact a licensed insurance broker that is registered to sell FAIR Plan coverage. The FAIR Plan Website's Broker Finder tool that can assist you in finding a broker in your area. You may contact the FAIR Plan directly at 800-339-4099.

The FAIR Plan is offering wildfire safety discounts for qualifying homes. When you get a renewal from the FAIR Plan, check it to make sure your discounts are included.

If you’re having trouble with your FAIR Plan policy, contact the Department of Insurance at (800) 927-4357 or insurance.ca.gov. We are here to help.