Buying a home in California has never been easy — soaring prices, competitive markets, and tight lending conditions already make the process daunting. Now, for many homeowners, a new obstacle has emerged that even the best budgeting cannot overcome: finding insurance at all.
In January 2024, NBC4’s I-Team investigated this growing crisis, revealing how long-time homeowners are being dropped by insurers, pushed onto the state’s FAIR Plan, and left to navigate an increasingly expensive and confusing insurance landscape. What was once a last-resort program is fast becoming the only option for thousands of Californians.
This article breaks down what is happening, what a recent court ruling could mean for FAIR Plan coverage, and how homeowners can adapt in a volatile market.
From Stable Coverage to Sudden Cancellation
Few stories capture the emotional toll of California’s insurance crisis better than that of Allison Rosenberg, a homeowner in Marina del Rey. After years with the same insurance company, she received an unexpected notice that her policy would not be renewed.
The reason: three claims in ten years — hardly excessive by traditional standards, but enough for her insurer to label her as too risky under today’s tightening underwriting rules.
Rosenberg contacted multiple insurers seeking replacement coverage, only to be turned away repeatedly. Her conclusion was simple and unsettling: finding insurance is no longer easy — even for responsible, long-term homeowners.
With no private option available, she was forced onto the California FAIR Plan, the state-mandated insurer of last resort.
The FAIR Plan’s Rapid Expansion Across California
The Fair Access to Insurance Requirements (FAIR) Plan was created after widespread urban fires in the late 1960s. All insurers licensed in California must participate in the pool, sharing the financial risk of homeowners who cannot obtain coverage elsewhere.
For decades, the FAIR Plan covered only a small fraction of the state’s homes. That has changed dramatically. According to NBC4’s I-Team, active FAIR Plan policies have more than doubled since 2018, rising to over 341,000 by late 2023.
Consumer advocates say the system is now under severe strain. Approximately 40% of FAIR Plan policyholders rely solely on that coverage, meaning they have no protection for theft, water damage, or personal liability. If a pipe bursts, a break-in occurs, or a washing machine hose fails, those losses are typically not covered without supplemental insurance.
As a result, many homeowners are now paying more for less comprehensive protection than they had in the private market.
The Court Ruling That Could Expand FAIR Plan Coverage
In November 2023, a California court upheld an order from Insurance Commissioner Ricardo Lara requiring the FAIR Plan to expand the types of coverage it offers. The goal is for the FAIR Plan to eventually include protections for liability, theft, and water damage — similar to standard homeowners policies.
While that ruling represents potential progress, implementation is expected to take years. The FAIR Plan has never priced or managed complex risks like liability or slip-and-fall claims. Developing actuarial models, regulatory guidelines, and administrative systems for these risks will take significant time and resources.
For now, FAIR Plan officials have stated only that they will carefully review the ruling and assess its implications for policyholders and the broader insurance market. Homeowners should not expect immediate changes to their coverage.
Premium Discounts for Fire Preparedness
There is a small bright spot for homeowners relying on the FAIR Plan: mitigation discounts.
Policyholders can receive premium reductions for specific home-hardening improvements designed to reduce wildfire risk. These include measures such as sealing eaves, installing fire-resistant chimney caps, and maintaining defensible space by clearing vegetation near the home.
Combined, these improvements can reduce FAIR Plan premiums by up to 14.5%. While modest, the discounts reflect a growing shift toward resilience-based pricing, where homeowners who invest in risk reduction can see direct financial benefits.
How AI and Data Are Reshaping Fire Risk Pricing
Technology is rapidly transforming how wildfire risk is measured in California. Both the FAIR Plan and private insurers are beginning to rely on data-driven models and artificial intelligence to evaluate risk on a house-by-house basis rather than by broad region or ZIP code.
This means two homes on the same street can now receive very different premiums depending on roof type, surrounding vegetation, slope, construction materials, and other property-specific factors.
This hyper-local risk modeling mirrors the catastrophe systems already used for flood and earthquake insurance. While it allows for more precise pricing, it also means some homeowners may face sharply higher premiums based solely on their individual risk profile.
What Homebuyers and Homeowners Must Do Now
With demand for FAIR Plan coverage surging, obtaining insurance has become slower and more complex. Industry experts emphasize several critical strategies for homeowners and buyers.
Start the insurance search early. The FAIR Plan is overwhelmed with applications, and binding a policy can take one to two weeks or longer. Mortgage lenders will not close escrow without proof of coverage, so insurance shopping must begin at the earliest stages of a transaction.
Know what coverage you can reasonably afford. While full dwelling protection should be maintained whenever possible, some homeowners may need to adjust personal property limits or deductibles to keep premiums manageable.
Work with an experienced independent broker. Homeowners may purchase FAIR Plan coverage directly, but brokers can identify remaining private-market options, secure mitigation discounts, and manage the complex paperwork required for supplemental policies.
The Systemic Imbalance in California’s Insurance Market
The FAIR Plan’s explosive growth highlights a deeper structural failure in California’s insurance ecosystem. Climate risk is rising faster than the regulatory and private-market systems can adapt.
As private insurers retreat, more homeowners are pushed into a plan that was never designed to serve as permanent primary coverage. Even as courts and regulators push for expanded FAIR Plan protections, the program itself is grappling with financial exposure, administrative limits, and rapidly changing technology.
At the same time, state leaders are encouraging modernization through the use of advanced modeling, wildfire-mitigation incentives, and regulatory reform. Progress is underway, but it is slow.
Conclusion: Adapting to a New Insurance Reality
California’s homeowners insurance market is undergoing a fundamental transformation driven by climate change, regulation, and data-driven risk assessment. For many residents, the FAIR Plan — once a rarely used safety net — has become a financial lifeline with serious limitations.
The court ruling requiring expanded FAIR Plan coverage offers promise, but implementation will take years. In the meantime, homeowners must adapt by starting early, investing in mitigation, staying properly insured, and working closely with knowledgeable professionals.
The old insurance system is not coming back. What emerges next will determine whether California can build a smarter, fairer, and more resilient insurance market for the decades ahead.
