Insurance Commish Expands FAIR Plan
In 2020, Insurance Policy of "Last Resort" Doubles Limit and Adds Liability Coverage
Insurance Commissioner Ricardo Lara has ordered an update to the California FAIR Plan, the state’s insurer of last resort for homeowners. During 2020, FAIR will begin to offer more comprehensive homeowner coverage and the coverage limit will increase. Lara’s decision is an urgent one. Since the Thomas Fire and mudflow, residents in the foothills of Santa Barbara and Montecito have reported receiving nonrenewal notices and having difficulty finding a traditional insurer who will offer homeowner insurance in high fire zones. Across the state, the commissioner’s office research showed the rate of nonrenewal increased by 10 percent in the zip codes that suffered “devastating” fires in 2015-2017.
Lara’s action orders FAIR Plan to offer “basic property insurance” that includes such traditional coverage as water damage, vandalism, and personal liability by June 1, 2020; currently FAIR only offers fire damage insurance for dwellings. The update includes an increase in the policy limit to $3 million from $1.5 million by April 1; the limit is unchanged since about 1993. The additional liability coverage may go up to $300,000, which would make an entire policy limit of $3.3 million.
Lara’s order requires changes to payments, as well. By February, FAIR is to enable policy payments in monthly installments without an extra fee, and to accept credit-card and electronic-fund transfers without fee.
The FAIR plan, established in 1968 following brush fires and riots in the prior decade, is a syndicate or pool of state insurers that participates in FAIR (Fair Access of Insurance Requirements) expenses, profits, and losses, according to the plan’s website. Historically, FAIR covers fire losses only, not the liability and other coverages common to homeowner policies
With Assemblymember Monique Limón and State Senator Hannah-Beth Jackson, the Montecito Association invited Lara to visit in August and presented results from a survey of 300 residents that indicated the majority of policy cancellations were occurring north of State Route 192. Further, they’d learned that high-end insurers Chubb and AIG claimed their profits over the past 17 years were wiped out in 2018, according to a report from Sharon Byrne, executive director for the association.
Limón called the increased investment in FAIR Plan “great news for California and our district. Since 2017, the issue of insurance coverage has been a point of discussion for many constituents in the area, and I’m glad our voices are being heard.” She further stated that she hoped the additional coverage would “provide peace of mind to some homeowners and help some families throughout our state.”