California Commissioner Orders Changes to FAIR Plan

California Insurance Commissioner Dave Jones issued an order directing the California Fair Access to Insurance Requirements Plan to make several changes in the wake of last year’s severe fire season.

The order includes enhanced coverage options, it eliminates the requirement that consumers prove they were rejected three times for standard insurance, provides more access to brokers registered with the FAIR Plan and includes other improvements designed to ensure California consumers have access to property insurance under the FAIR Plan.

Jones directed the California Department of Insurance last year to review the FAIR Plan in the wake of fires which devastated parts of California. He met with FAIR Plan managers to obtain their input on improvements before issuing the Order.

“Consumers in high risk fire areas who are unable to find standard home insurance can purchase fire insurance through the California FAIR Plan, which was created by the Legislature and governor to provide fire insurance where it is not otherwise available,” Jones said in a statement.

The FAIR Plan was established by legislation in 1968 for consumers who are unable to find coverage in the voluntary insurance market. The FAIR Plan provides basic property insurance as a last resort. There are roughly 6,600 brokers registered with the FAIR Plan. T

The order responds to concerns that consumers are having difficulty finding brokers who can assist them in applying for coverage. It requires the FAIR Plan to include on its website access to a database where users can find registered brokers near them.

CDI found the current property insurance policy offered by the FAIR Plan left consumers at financial risk by not offering optional coverages for costs that are often incurred as a result of a disaster. Jones ordered the FAIR Plan to revise its policy to offer optional coverages for the replacement cost of contents and for debris removal.

Jones also ordered the FAIR Plan to automatically include its dwelling replacement cost and inflation guard coverage on all eligible dwellings, unless the policyholder specifically declines the coverage. Prior to this order, consumers had to opt-in to this coverage for which there is no additional charge except for premium increases associated with future increases in the dwelling limit.

“These improvements should increase access to homeowners’ coverage, particularly in areas of the state that have struggled to attract traditional insurers,” Jones said.

Related:

• Californians Pushed by Wildfires into High-risk Insurance Market
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• California Blazes Destroy 2,000-plus Homes, Curb Insurer Appetites
• Wildfires, and Now El Niño May Boost Californian’s Appetites for Surplus Lines