NBC - KNBC - Navigating Home Insurance - 5:30pm
Published Date: 01/17/2024
California’s Home Insurance Crisis: What Homeowners Need to Know About the Fair Plan, Court Rulings, and the Search for Coverage
Buying a home in California has always been difficult—but keeping it insured has become a whole new challenge.
In recent years, thousands of homeowners across the state have opened their renewal notices only to find devastating news: their insurer is pulling out, non-renewing, or simply refusing to write new business in their ZIP code.
A recent investigative report from NBC Los Angeles, featuring insurance expert Karl Susman and consumer advocate Amy Bach from United Policyholders, highlights the growing crisis—and the limited options many Californians now face.
This is more than a temporary disruption. It’s a structural shift in the state’s property insurance landscape, one that’s forcing regulators, insurers, and consumers alike to rethink how coverage works in a high-risk environment.
The Growing Coverage Crisis: “I Thought It Would Be Easier”
For homeowners like Allison Rosenberg of Marina del Rey, the problem isn’t just higher premiums—it’s finding anyone willing to insure her home at all.
After more than a decade with the same insurer, she received a notice stating that her coverage would not be renewed. The reason? She had filed three claims in ten years—hardly excessive, but enough to make her “too risky” in today’s volatile insurance market.
“I hit the wall pretty quickly,” Rosenberg told NBC. “With no takers, I had to turn to the California FAIR Plan.”
Her experience is becoming alarmingly common. Insurers across the state have drastically reduced their exposure, particularly in wildfire-prone or coastal regions. As a result, tens of thousands of homeowners who once had multiple carrier options now find themselves with only one: the California FAIR Plan, the state’s so-called insurer of last resort.
The FAIR Plan: From Safety Net to Main Option
The California FAIR Plan was established decades ago to ensure basic access to fire insurance for residents who couldn’t obtain coverage elsewhere. It’s funded collectively by all licensed insurers in the state, functioning as a shared safety net.
But that safety net is being stretched to its limit.
Between 2018 and 2022, FAIR Plan policies more than doubled, jumping to over 341,000 by late 2023. According to data obtained by NBC’s I-Team, roughly 40% of those homeowners rely on the FAIR Plan as their only form of coverage.
That’s a dangerous position to be in, explains Amy Bach of United Policyholders. “The FAIR Plan only covers fire,” she notes. “If your toilet overflows, if someone breaks in, if your washing machine hose bursts—you get nothing.”
In other words, homeowners relying solely on the FAIR Plan are drastically underinsured. Without supplemental coverage (often called “Difference in Conditions” or “wraparound” policies), they remain exposed to theft, liability, and water damage—some of the most common and costly types of household claims.
A New Court Ruling—and a Long Road Ahead
In late 2023, a California court ruling upheld an order from the state’s Insurance Commissioner requiring the FAIR Plan to expand its offerings beyond fire coverage. In theory, this means the FAIR Plan will eventually have to include comprehensive homeowners policies—covering theft, liability, and water damage—similar to those offered by private insurers.
While that sounds promising, Susman cautions that implementation will take time. “Even if they accepted that ruling today,” he told NBC, “it could be years before there’s actually a change.”
The reason is simple: the FAIR Plan has never priced or managed these kinds of risks before. “They don’t know how to price theft, liability, or slip-and-fall claims,” Susman explains. “They’ve never done it.”
The FAIR Plan itself confirmed it will “carefully review the court’s ruling and its potential impact,” signaling that any expansion will be slow and methodical. In the meantime, homeowners are stuck with limited coverage options and rising costs.
Discounts for Fire Safety: A Small but Helpful Step
In the short term, the FAIR Plan is offering “home hardening” discounts—small reductions in premium costs for homeowners who make their properties more fire-resistant.
There are two main categories:
- Structural improvements – such as sealing eaves, installing ember-resistant vents, or adding spark arrestors to chimneys.
- Vegetation management – clearing brush or flammable materials within a designated perimeter around the home.
Combined, these measures can earn homeowners up to 14.5% in premium discounts. While modest, these incentives encourage prevention—and signal a broader shift toward risk-based pricing, where individual property conditions, not just ZIP codes, determine rates.
Technology Is Changing How Rates Are Calculated
For the first time, insurers (including the FAIR Plan) are using data modeling and technology to more accurately predict fire risk. That means two houses on the same block could now have vastly different premiums, depending on vegetation, distance from fire stations, or construction materials.
This move toward granular risk assessment has its critics—it could create affordability issues for homeowners in older or less-upgraded properties—but experts argue it’s a necessary modernization.
“Technology allows for precision,” says Susman. “It’s not about penalizing anyone—it’s about pricing risk fairly.”
The Application Backlog: Start Early
If there’s one piece of advice all experts agree on, it’s this: start the insurance search early.
The FAIR Plan is overwhelmed. “It’s taking sometimes one to two weeks just to get a policy bound,” Susman says. “They’re drowning in applications.”
That backlog can leave homeowners vulnerable during closing or renewal periods. Without active coverage, mortgage lenders can suspend funding, and escrow delays can cost buyers thousands.
The takeaway? Don’t wait until your renewal date to act. Begin the process at least 60–90 days in advance.
Making Coverage More Affordable: Expert Tips
Both Susman and Bach offered several consumer strategies to help Californians manage costs and improve insurability during this turbulent time.
1. Prioritize the essentials.
If your premium is straining your budget, consider trimming nonessential coverages—such as reducing contents coverage for personal belongings—but never cut your dwelling coverage (the replacement value of your home).
2. Raise your deductible.
Increasing your deductible can significantly lower premiums, though it means paying more out-of-pocket in the event of a claim. It’s a worthwhile tradeoff for many homeowners struggling with affordability.
3. Work with an experienced insurance broker.
“Consumers can buy FAIR Plan policies directly or through brokers,” Susman explains. “The cost is identical—and brokers can’t charge fees for FAIR Plan policies.”
A seasoned broker can help you find supplementary policies, discounts, and coverage gaps that you might miss on your own.
4. Avoid small claims.
Amy Bach warns that frequent small claims can damage your risk score, making you less desirable to insurers. “It can impact your future options,” she says. Handle minor issues out of pocket when possible.
5. Don’t let your current policy lapse.
If you still have a private-market policy, do everything possible to keep it. Set up automatic payments and maintain continuous coverage. Losing your policy could make it nearly impossible to find a replacement at a reasonable rate.
Regulatory Action: Change Takes Time
Governor Gavin Newsom and Insurance Commissioner Ricardo Lara have both acknowledged the urgency of California’s insurance crisis. In late 2023, new regulatory guidelines were introduced to encourage insurers to start writing policies again—but meaningful change will take time.
As Susman points out, “We’re in a transition period. Everyone’s working to fix the system, but it’s going to take months, maybe years, to see the results.”
The Bottom Line: Stay Informed, Stay Insured
California’s insurance challenges are far from over. Yet even amid the chaos, progress is happening—through court rulings, policy reform, and smarter risk assessment tools.
For now, homeowners’ best defense is preparation: maintain your current coverage, explore every option, and take advantage of available discounts.
As one homeowner told NBC, “I’ll take what I can get at this point.”
That’s the unfortunate reality today—but with time, technology, and reform, California’s insurance market may eventually return to what it was meant to be: a system that protects, not punishes, the people who call this state home.
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