Mariposa County French Fire on July 4, 2024 - Photo taken looking towards the Mariposa Masonic Lodge. Credit: Sierra Sun Times
What you need to know: Agreement would strengthen the state’s FAIR Plan with improved transparency, financial stability, and expanded coverage; this follows Governor Newsom’s executive order and legislative proposal to strengthen the market for consumers.
Related: California Insurance Commissioner Lara Says, “Modernizing the FAIR Plan is a Crucial Step in Our Strategy to Stabilize California’s Insurance Market,” as He Continues Bold Insurance Reform Agenda with Landmark FAIR Plan Modernization
July 27, 2024 - SACRAMENTO – On Friday, California Insurance Commissioner Ricardo Lara announced a modernization of the state’s FAIR Plan, also known as the “insurer of last resort,” to strengthen the program for those who depend on this system for affordable and reliable coverage.
This follows Governor Newsom’s call for swift regulatory action to build a stronger FAIR Plan, strengthen and stabilize California’s marketplace with a focus on creating a better rate approval process, and accelerating the implementation of regulations.
“California’s all-of-the-above strategy is addressing this decades-old crisis to get people the reliable and affordable insurance they need. Strengthening the state’s FAIR Plan has been a key priority, and these upgrades will help stabilize the entire market while providing more stability for those who already depend on it.”
Governor Gavin Newsom
Modernizing the FAIR Plan
The FAIR Plan has agreed in a binding legal stipulation to issue a new Plan of Operation within 30 days that will implement Commissioner Lara’s plan to offer homeowners, consumers, and business owners:
- Expanded Coverage: Establishing a new “high-value” commercial coverage option with limits up to $20 million per building, along with past increases for residential policies.
- Financial Stability: Creating a sound financial formula to protect the market in extreme loss scenarios.
- Improved Transparency: Requiring increased public reporting on FAIR Plan activity and customer service metrics.
This is part of the Commissioner’s Sustainable Insurance Strategy, a package of reforms to strengthen California’s marketplace and maintain strong consumer protections.
The California FAIR Plan Association was established in statute in 1968 to meet the needs of California homeowners unable to find insurance in the traditional marketplace. The FAIR Plan is not a state agency, nor is it a public entity. There is no public or taxpayer funding. The FAIR Plan is a syndicated fire insurance pool comprised of all insurers licensed to conduct property/casualty business in California.
How we got here
In September of last year, Governor Newsom signed an executive order urging Insurance Commissioner Lara to take swift action to address issues with the insurance market and expand coverage options for consumers, while maintaining strong consumer protections and keeping plans affordable.
In May, the Newsom Administration released a proposal to increase the transparency and speed of rate change application approval timelines, while remaining consistent with Proposition 103’s consumer protections from excessive, inadequate, and unfairly discriminatory insurance rates.
Insurance rates nationwide have been on the rise due to the impacts of the climate crisis. California rates have been below the national average and significantly less than some other states, with the average yearly cost for $300,000 homes at:
- California – $1,405
- National – $2,601
- Texas – $3,851
- Florida – $4,419
Source: Office of the Governor
