California FAIR Plan Policy Surge: A Regulatory Shift in Home Insurance
California FAIR Plan Sees Surge in Policies Amidst Regulatory Reforms
The California FAIR Plan, acting as the insurer of last resort for homeowners struggling to secure coverage from traditional markets, has seen a dramatic increase in active policies. Since September 2019, policies have surged more than fourfold, reaching 668,000 as of January 2026, according to recent figures. This trend highlights the ongoing shifts in the insurance landscape under current regulatory compliance requirements.
The FAIR Plan is crucial for offering basic fire coverage to properties labeled high-risk by other insurers. It operates without taxpayer funding, drawing instead on contributions from participating insurance carriers. During a California Assembly Insurance Committee hearing on January 28, FAIR Plan President Victoria Roach highlighted the organization's evolving role. "How do we get back to being the insurer of last resort?" Roach questioned, as Assemblymember Lisa Calderon described the plan as "California's safety net."
Some constituents choose the FAIR Plan over traditional insurance due to its cost benefits, particularly in lower-risk areas. Calderon noted that combining a FAIR Plan policy with a difference-in-conditions policy can result in premiums significantly lower than those from admitted carriers. This has sparked interest from real estate brokers and mortgage companies, who suggest that seeking quotes from the FAIR Plan could lead to lower insurance expenses.
However, insurance lobbyists and industry experts voice concerns about the potential effects on the admitted market. Terry McHale of Aaron Read & Associates referred to the situation as a challenge requiring resolution, while Mark Sektnan from the American Property Casualty Insurance Association emphasized the difficulty of decreasing FAIR Plan enrollment when it offers a cheaper alternative for long-term policyholders.
In response to these concerns, legislative and regulatory measures are under review. Commissioner Ricardo Lara and Assemblymember Calderon have put forth AB 1680, advocating for the FAIR Plan to expand its offerings to include comprehensive homeowners insurance beyond basic fire coverage. The FAIR Plan is currently assessing this proposed legislation and has yet to comment regarding its impacts on underwriting and claims processing.
During the committee hearing, Roach acknowledged the feasibility of offering broader coverage but noted the significant resource requirements, potentially increasing the FAIR Plan’s budget by 50%. Although policy numbers continue to rise, the growth rate has slowed due to reduced large-scale non-renewals by admitted market insurers.
The FAIR Plan has also requested a 35.8% average rate increase pending approval from the California Department of Insurance. This proposal aims to address affordability issues faced by policyholders, particularly those on fixed incomes. AB 1680 is slated for committee review on March 5, which could significantly impact the FAIR Plan's future operations and its role in California's changing insurance industry.