California Insurance Commissioner Ricardo Lara is actively pursuing a reform package for the California FAIR Plan, addressing long-standing issues with the state’s “insurer of last resort.” Historically, the FAIR Plan has served as a safety net for many Californians, but the increasing reliance on it has exposed significant flaws within a system not designed to accommodate such demand.
As insurance companies have opted out of high-risk areas, many homeowners and business owners find themselves with limited options, often resulting in costly FAIR Plan coverage. Lara emphasizes the need for reform, stating, “Decades of neglect have created a crisis of availability.” His proposed reforms aim to ensure that homeowners and business owners have more choices beyond the FAIR Plan.
Key elements of Lara’s reform strategy include:
- Greater Coverage: A temporary expansion for high-value commercial properties, homeowners associations, and affordable housing developments will be available from July 26, 2025. This expansion will allow coverage limits of up to $20 million per building, with a total maximum limit of $100 million per location, set to expire in 2028.
- Improved Transparency: Starting July 1, 2025, the FAIR Plan will enhance transparency by publicly posting data on total exposures, policy counts, and financial information on its website, making it accessible to policymakers and the public.
- Market Stability: In response to insurance companies withdrawing from the market, Lara took steps in 2024 to stabilize conditions and recently filed a demurrer to dismiss a lawsuit that he argues undermines efforts to restore competition in the insurance market.
- Claims Handling Improvement: Investigations are underway regarding the FAIR Plan’s management of wildfire-related smoke damage claims in Los Angeles, with Lara pushing for better staffing, improved claims processes, and a reduction of costs transferred to consumers.
- Operational Accountability: An ongoing financial examination of the FAIR Plan will be reported soon, focusing on compliance with prior recommendations aimed at enhancing governance, underwriting practices, and customer service.
- Fiscal Tools: Lara is co-sponsoring Assembly Bill 226, which would allow the FAIR Plan to access financial resources like bonds and loans to improve accessibility to fire insurance.
Lara reiterates that the FAIR Plan should be a temporary solution, not a permanent fixture, and that it is crucial for consumers to have more options in a competitive insurance market. Recent court actions include a demurrer filed against a lawsuit that challenges the Commissioner’s authority and