Will Rogers’ former ranch house was destroyed by the Palisades Fire. Photo taken on Jan. 8, 2025, by California State Parks

Reform package targets decades of neglect in California’s insurance safety net

June 25, 2025 - LOS ANGELES — Insurance Commissioner Ricardo Lara continues to advance a comprehensive reform package of the California FAIR Plan in his ongoing efforts to confront the state’s “insurer of last resort’s” long-standing imbalance head-on. For decades, the FAIR Plan has functioned as a last-resort backstop for many Californians. However, in the past 10 years, its expansion has revealed deep flaws in a system that was never designed to bear the weight it now carries today. Allowed under Proposition 103 to bypass high-risk areas, insurance companies have left a growing number of homeowners and business owners with no option but costly, limited FAIR Plan coverage.

“Decades of neglect have created a crisis of availability,” said Commissioner Lara. “We want homeowners and business owners to have choices – not just a last resort. We cannot accept the growth of the FAIR Plan as inevitable. My continued reforms create the first-ever requirement for insurance companies to write policies in wildfire-distressed areas if they want to use forward-looking models or the cost of reinsurance in their rates. This is about reforming the limits of Proposition 103 and delivering on the promise of insurance access for every Californian.”

Through his Sustainable Insurance Strategy, Commissioner Lara is continuing to restore the FAIR Plan to its original purpose – as a temporary solution, not a permanent one – while giving Californians more options and stronger protections in the traditional insurance market.

Commissioner Lara’s major reforms on the FAIR Plan include:

• Greater coverage: Commissioner Lara approved temporary expansion of FAIR Plan coverage for high-value commercial properties, homeowners associations, and affordable housing developments, available July 26, 2025. This new “high-value” commercial coverage option would cover properties with limits up to $20 million for each building with a total maximum limit of $100 million per location, and would sunset in 2028.
• Improved transparency: Commissioner Lara’s actions under his executive authority have expanded transparency for the FAIR Plan effective July 1, 2025, including total exposures, policy counts, financial data, and other information publicly posted on the FAIR Plan website and shared with policymakers. 
• Greater stability to support market expansion: Commissioner Lara acted in 2024 to stabilize market conditions after insurance companies further withdrew due to fear of an expanding FAIR Plan with rising costs, which a Bloomberg news story called a “hidden crisis.” On June 23, 2025, the Department of Insurance asked a judge to reject a lawsuit that does nothing to address the state’s insurance crisis. This lawsuit, filed by Consumer Watchdog, hurts homeowners, small business, and nonprofits who need access to insurance options and undermines Commissioner Lara’s efforts to restore competition to all areas of the state so people can get off the FAIR Plan and back to the regular insurance market.
• Full and fair payment of Los Angeles wildfire claims: The Department is currently investigating the FAIR Plan’s handling of smoke damage claims from the Los Angeles wildfires, to resolve consumers’ complaints and help get people back on their feet as they recover their lives. Commissioner Lara also demanded that the FAIR Plan hire more staff, improve its claims process, and shift costs away from consumers.
• Greater operational accountability: Commissioner Lara expects to file in the coming weeks the Department’s Report of Examination for an ongoing financial examination of the FAIR Plan, including its compliance with recommendations from the Department’s 2022 Operational Assessment Report. The report called for significant changes in the FAIR Plan’s governance, operations, underwriting and claims handling, risk management, customer service, and financial planning strategies and policies.
• Additional fiscally responsible tools: Commissioner Lara is proud to co-sponsor Assembly Bill 226 jointly authored by Assembly Member Lisa Calderon and David Alvarez that would authorize the FAIR Plan to access bonds, loans, and lines of credit, subject to prior approval by the Insurance Commissioner, in order to make fire insurance more accessible.

“The FAIR Plan needs to be a temporary option, not the only option,” said Commissioner Lara. “My top priority is for people to have more choices in a competitive market. And for those unable to find coverage right now, the FAIR Plan needs to provide the services and benefit payouts they deserve, quickly and fully.”

Notes:

• The Department filed a “demurrer” in Los Angeles Superior Court on Monday, June 23, requesting a judge dismiss Watchdog’s lawsuit on the grounds that it fails to meet the legal standard for a “cause of action.” A demurrer is a strong statement of opposition to a lawsuit.
• The Department’s demurrer states: “Pursuant to his broad authority over property and casualty insurance rates under Proposition 103, the Insurance Commissioner (the Commissioner) issued two bulletins (Bulletins) concerning procedures that insurers who are members of the California FAIR Plan Association (FAIR Plan) may use for certain types of rate applications to seek recoupment from their policyholders, through temporary supplemental fees (TSFs), for any FAIR Plan assessments. Petitioner Consumer Watchdog (Petitioner) seeks to invalidate the Bulletins. Petitioner’s arguments all fail.” 
• Department of Insurance data shows the FAIR Plan – already at more than 140,000 policies in 2015 – grew in 2019, shortly after major wildfires. The FAIR Plan currently stands at approximately 4% of the state’s residential market, per 2023 figures. A 2016 order under a previous Department administration expediting FAIR Plan coverage without requiring a diligent search may have contributed to the growth of the FAIR Plan over the past decade. 
  Source: CA. Dept. of Ins.