Mountain Fire and the California FAIR Plan

Published Date: 11/13/2024

After the Mountain Fire: What California’s FAIR Plan Really Means for Homeowners

When the Mountain Fire tore through Ventura County, it took only minutes to erase entire neighborhoods. Families who had lived in their homes for decades were left standing in ashes, sifting through remnants of their lives — jewelry melted to silver dust, family photos charred beyond recognition, heirlooms reduced to memory.

Among the victims were Kim and Lynette Wynn, sisters who lost their home in Camarillo in just 12 minutes. “I’m the sibling that keeps all the memories,” Kim said tearfully. “All the heirlooms from my great-grandparents — everything’s gone.”

Their loss mirrors that of thousands of Californians who have watched wildfires consume not just their property but their sense of security. And while some families were able to rebuild thanks to their homeowners insurance, many others faced a devastating discovery: their policies had been canceled just days before the fire began.

“I feel for those folks,” one survivor said. “How are they going to rebuild? We’re talking hundreds of thousands — millions.”

In a recent Insurance Hour appearance on FOX’s On Your Side, insurance expert Karl Susman explained what’s happening — and why more and more homeowners are being forced onto California’s FAIR Plan, the state’s insurer of last resort.

1. The Unseen Crisis: When Coverage Disappears Before Disaster

For many residents, the tragedy of the Mountain Fire began not with the flames, but with an envelope in the mail — a non-renewal notice from their insurance company.

“We’re hearing from homeowners who lost their coverage just days before the fire,” Susman explained. “That’s becoming far too common.”

California’s insurance crisis has reached a critical point. Major carriers — including State Farm, Allstate, and Farmers — have paused or severely limited new policies in high-risk wildfire areas. Others are non-renewing existing customers whose homes fall within updated “risk zones.”

Why? The financial math no longer works. Between inflation, construction costs, and back-to-back wildfire seasons, many insurers are paying out more than they collect in premiums. And under California’s strict rate regulations (dating back to Proposition 103), companies can’t easily adjust pricing to reflect today’s escalating risks.

“This is the perfect storm,” Susman said. “Carriers have been afraid of exactly this — fire after fire after fire — and we’re living it right now.”

2. A Tale of Two Homeowners

While the Wynns lost everything, other families managed to rebuild thanks to robust coverage — but even they acknowledge how fragile that protection has become.

Take Lori Brennan, who rebuilt her Malibu home in just 14 months after losing it in the Woolsey Fire. Her success story is proof that comprehensive insurance can work — when you have it.

“The insurance company didn’t fight me,” she said. “They literally paid everything in full.”

Brennan’s experience underscores how the system is supposed to function: timely claim payments, escrow-managed rebuilding funds, and oversight to ensure proper reconstruction. But it also highlights the growing divide between those who still have private insurance and those who no longer qualify.

3. The California FAIR Plan: A Lifeline, Not a Luxury

So what happens when private insurers stop writing coverage?

That’s where the California FAIR Plan comes in.

Created in 1968 after riots and urban fires made entire neighborhoods uninsurable, the FAIR Plan (Fair Access to Insurance Requirements) serves as a state-mandated pool of all admitted insurers operating in California. Every company doing business in the state must participate, sharing both profits and losses.

“The FAIR Plan was designed for exactly this situation,” Susman explained. “When you can’t get coverage in the private market, it gives you basic fire insurance.”

But the FAIR Plan is not a full homeowners policy. It only covers fire and smoke damage — not theft, water damage, liability, or loss of use. To achieve complete protection, homeowners must buy an additional Difference in Conditions (DIC) policy through a private carrier.

In short:

• FAIR Plan = fire coverage
• DIC Policy = everything else

Together, they can approximate traditional homeowners insurance, though often at a higher combined premium.

4. The Rising Role of the FAIR Plan

In recent years, the FAIR Plan has grown far beyond its intended size. Originally meant as a temporary fallback for a small fraction of homeowners, it now covers more than 350,000 properties statewide, representing billions in exposure.

“People think of it as government insurance,” Susman said, “but it’s actually run by the industry itself — a collective of private insurers who are required by law to fund it.”

While the FAIR Plan has proven resilient so far, experts worry about what happens if another record-breaking fire season strikes. A catastrophic event could trigger assessments — additional charges levied on every participating insurer to cover deficits — costs that may ultimately trickle down to all policyholders across California.

5. Why Homeowners Are Being Non-Renewed

Homeowners like the Wynns often ask: Why was my policy dropped?

The answer lies in how insurers evaluate risk. They use a combination of factors — location, vegetation, slope, wind patterns, and proximity to fire stations — to generate a “wildfire score.” Once that score crosses a certain threshold, carriers often pull back or decline renewal, regardless of the homeowner’s personal mitigation efforts.

“That’s what frustrates people,” Susman said. “You can harden your home, clear brush, install sprinklers, and still lose coverage just because of your ZIP code.”

While California’s Safer from Wildfires initiative now requires insurers to offer discounts for certain mitigation steps, implementation remains uneven — and many consumers aren’t yet seeing relief.

6. The Emotional and Financial Aftermath

For families rebuilding from the Mountain Fire, the process is long and grueling. Even with coverage, payouts move slowly, reconstruction costs soar, and emotional recovery lags behind physical rebuilding.

“When you have a mortgage,” Brennan explained, “the insurance company sends the payment to your lender. The bank holds it in escrow, and only releases funds after inspections.”

It’s a system designed to prevent fraud, but it often feels bureaucratic to homeowners trying to rebuild their lives.

For those without insurance, the road ahead is even steeper. Grants and FEMA assistance can help, but they rarely come close to full replacement costs.

7. What Homeowners Can Do Right Now

Even amid uncertainty, homeowners still have options to protect themselves and reduce risk exposure:

1. Review your coverage annually.

Ensure your policy’s dwelling limit matches current rebuilding costs, which have risen sharply due to inflation and labor shortages.

2. Document mitigation efforts.

Maintain proof of fire-resistant roofing, defensible space, and ember-resistant vents. When insurers return to risk-based pricing, documentation will matter.

3. Explore FAIR Plan and DIC combinations.

If private insurers won’t write your policy, a FAIR Plan paired with a DIC policy can restore essential coverage.

4. Avoid coverage gaps.

Never let a policy lapse — reinstatement in high-risk areas is almost impossible once canceled.

5. Work with an independent agent.

Independent brokers like Susman can access multiple carriers and surplus lines markets, often finding coverage where others cannot.

8. The Broader Policy Challenge

The Mountain Fire illustrates how climate risk, outdated regulation, and industry economics now intersect in ways the system was never designed to handle.

California’s Proposition 103, passed in 1988, limits insurers’ ability to raise rates without state approval. While it successfully curbed price gouging for decades, it also tied insurers’ hands as wildfire risk intensified.

“We’re operating under a 1980s framework in a 2025 climate,” Susman noted. “It’s time to modernize how we price and regulate risk.”

Reform efforts — such as Commissioner Ricardo Lara’s Sustainable Insurance Strategy — aim to update how risk is modeled and priced, giving insurers more flexibility while rewarding mitigation. If successful, these reforms could stabilize the market and reduce reliance on the FAIR Plan over time.

9. Lessons from the Ashes

The Mountain Fire’s devastation is a stark reminder that the insurance crisis isn’t just financial — it’s human. For every statistic, there’s a family sorting through rubble, wondering how to start over.

The FAIR Plan, imperfect as it is, remains a vital lifeline for those caught between rising risk and shrinking private markets. It’s a symbol of resilience — and of a system that, while strained, still functions when people need it most.

“Insurance is what allows communities to rebuild,” Susman said. “Without it, recovery stops — and that’s something California can’t afford.”

10. Moving Forward

As California braces for another fire season, the lessons of the Mountain Fire are clear: homeowners need both personal preparedness and policy reform.

Home hardening, defensible space, and updated coverage reviews are the first line of defense. But without systemic change — allowing insurers to price accurately while holding them accountable to consumers — the FAIR Plan will continue to grow beyond its capacity.

Until then, homeowners can take comfort in one truth: even amid the ashes, rebuilding is possible. Insurance, at its best, isn’t just about money — it’s about restoring stability, dignity, and hope.