California FAIR Plan Crisis and Home Hardening Reforms

Published Date: 07/16/2024

California’s homeowners are facing one of the most difficult insurance markets in decades. Premiums are surging, coverage options are shrinking, and millions of residents are being pushed onto the California FAIR Plan — the state’s “insurer of last resort.”

In this episode of Insurance Hour, host Karl Susman visited State Senator Marie Alvarado-Gil at her rural Northern California home for a candid, on-location discussion about the FAIR Plan, home-hardening discounts, and what real solutions might look like for families struggling to stay insured.



Their conversation revealed the emotional and economic weight of California’s insurance crisis — and the urgent need for reform, collaboration, and innovation.

The FAIR Plan — Lifeline or Burden?

When many people think of the FAIR Plan, they picture a temporary safety net for homeowners deep in wildfire-prone mountains. But that image no longer reflects reality.

“Almost half of the FAIR Plan’s business isn’t even in the hills,” Susman noted. “It’s in the flats. And that’s not what the FAIR Plan was meant for.”

Created in 1968, the California FAIR Plan was designed to provide basic fire insurance to properties that could not obtain coverage on the private market. It is not a government agency, but a state-mandated, nonprofit pool funded by all insurers operating in California.

Because it is a nonprofit, the FAIR Plan is structured to hold minimal reserves and pay out nearly everything it collects in premiums. But with wildfire claims and costs continuing to rise, even this safety net is under severe financial strain.

“The Fair Plan president said they needed a 60–70% rate increase,” Susman recalled. “They’re only getting around 20%. That means even their current rates — as high as they are — are still inadequate.”

A Lawmaker Experiencing the Crisis Firsthand

Senator Marie Alvarado-Gil is not speaking about the FAIR Plan from a distance. She is on the FAIR Plan herself.

“I have the honor of being the only member of the state legislature that’s on the FAIR Plan,” she said. “When my constituents talk about their frustrations, I tell them, ‘I get it. I’m walking in your shoes.’”

After moving from the Bay Area to a rural mountain property, she expected higher insurance costs. What she didn’t expect were massive year-over-year premium increases and shrinking coverage options.

“At first, it wasn’t a deterrent,” she said. “But after a few years, I saw these steep increases and realized something was wrong.”

Many of her constituents face deductibles of $10,000 to $20,000, with premiums that exceed their mortgage payments.

“Insurance should not cost more than your mortgage or your utilities,” she said. “Yet that’s what’s happening across rural California.”

A System Stretched Beyond Its Original Purpose

The FAIR Plan was designed to be a backstop, not a primary insurer. Today, it has become the default option for millions of Californians.

“Right now everyone is flocking to the FAIR Plan because there simply are no options,” Susman explained. “And that’s not sustainable.”

As private carriers retreat from high-risk regions or stop writing new business altogether, the FAIR Plan absorbs more risk than it was ever intended to handle. The lack of competition is driving costs even higher and, ironically, making insurance less available for the very people the system was meant to protect.

Home Hardening Discounts — Progress, but Not a Solution

One of the few bright spots in California’s current system is the introduction of home-hardening and defensible-space discounts. These incentives reward homeowners who invest in fire-resistant roofing, ember-resistant vents, vegetation clearance, and other mitigation measures.

The FAIR Plan became the first insurer in California to receive Department of Insurance approval for such discounts.

“There are two types of discounts,” Susman explained. “One for what you do to your home, and one for what you do around your home. The total discount is 14.5%, which is actually significant compared to other carriers.”

Still, both Susman and the Senator emphasized that these discounts do not come close to covering the thousands of dollars homeowners must invest to qualify.

“I’ve invested thousands every year clearing brush, adding gravel, and maintaining defensible space,” Alvarado-Gil said. “That 14% helps — but it doesn’t cover the cost of the work.”

To prevent abuse, the FAIR Plan has also announced it will inspect 100% of properties applying for discounts — a major logistical challenge.

“They’ll give you the discount based on your signature,” Susman said. “But it might take months before inspection. And if you don’t qualify, they’ll take it back retroactively.”

Shifting the Focus From Payout to Prevention

Both Susman and the Senator agree that California’s insurance culture must shift from rebuilding after disaster to preventing loss in the first place.

“Most people say they’d rather have a covered claim,” Susman said. “But a claim means something bad happened. We should be focusing on prevention.”

Fewer claims mean lower long-term costs for everyone — a basic actuarial reality.

Yet, as Alvarado-Gil noted, many homeowners cannot afford large-scale mitigation without stronger government support. Grants exist, but participation remains uneven.

State Grants and Firewise Communities

California is already investing millions in wildfire mitigation through grants and Firewise community programs, but there is still a gap between funding and meaningful action.

“We’re putting money into helping homeowners build defensible space and harden their homes,” the Senator said. “But we’re not seeing the same level of follow-through from landowners.”

She stressed the importance of community-wide participation.

“If I don’t do my part, I’m putting my neighbors at risk,” she said. “Fire doesn’t stop at a fence line.”

Shared responsibility, she argued, is essential for meaningful risk reduction.

Equity, Geography, and Fairness in Insurance Pricing

The discussion also addressed the sensitive issue of risk-based pricing and the idea that rural residents “choose” to live in hazardous areas.

“People say, ‘Well, you chose to live in the mountains,’” Alvarado-Gil said. “But that’s not fair. Everyone chooses where they live. Every area has risk.”

She made it clear that insurance should not be punitive based solely on geography.

“The California dream means being able to live where you want to live,” she said. “Insurance should not be the deciding factor.”

Susman agreed that California is moving away from blunt zip-code pricing toward more property-specific underwriting.

“Carriers will soon be able to look at your house specifically — not just your neighborhood,” he said. “If you’ve done the work, that should make a difference. And soon, it will.”

Could a Federal Catastrophe Insurance Program Work?

One of the most thought-provoking moments in the discussion centered on a little-known federal proposal from Congressman Adam Schiff to create a national catastrophe reinsurance program.

Under the proposal, FEMA flood insurance, state FAIR Plans, and programs like the California Earthquake Authority would be replaced by one national disaster pool. Private insurers would purchase reinsurance from the federal system to protect against wildfire, flood, and earthquake losses.

“It’s the kind of big-picture thinking we may need,” Susman said.

The Senator agreed.

“We have the technology, the wealth, and the intelligence to solve this,” she said. “What we need is political will.”

Her office plans to raise the issue during advocacy efforts in Washington, D.C.

California’s Broader Climate Risk Reality

Wildfire is just one of many climate threats facing California. Alvarado-Gil’s district alone has experienced flooding, mudslides, snowstorms, drought, and extreme wind events in recent years.

“California isn’t just wildfire,” she said. “We have extreme weather across the board. We have to look at this holistically.”

That reality, she argued, requires a statewide resilience strategy that protects every region without pitting communities against one another.

The Path Forward — Reform, Resilience, and Realism

Both Susman and the Senator expressed cautious optimism about the Sustainable Insurance Strategy being implemented by Commissioner Ricardo Lara. The plan aims to modernize pricing rules, allow catastrophe modeling, and encourage insurers to return to California.

“It’s not perfect,” Susman said, “but we can’t let perfection be the enemy of progress.”

If successful, these reforms could reduce reliance on the FAIR Plan, restore private competition, and reward homeowners who invest in mitigation.

Until then, they urged homeowners to remain proactive, document improvements, and take advantage of any available grants and discounts.

“Do what you can,” Susman said. “Protect your home, your neighbors, and your community.”

Final Thoughts on Shared Responsibility and Hope

Senator Alvarado-Gil’s story reflects the lived reality of thousands of Californians navigating a broken insurance system. But it also highlights what is possible when policymakers experience the crisis firsthand and commit to collaborative solutions.

“We have to stop pointing fingers and start working together,” she said. “Whether we live in the mountains, the valleys, or by the coast — we’re all Californians. And we all deserve to feel safe in our homes.”

For now, that means hardening homes, applying for discounts, supporting community-level mitigation, and advocating for reform. And it means holding onto the belief shared by both the Senator and Susman — that California can still lead the nation in building a fair, sustainable, and forward-looking insurance system.