Unlocking Homeowner Insurance Savings: Senator Marie Alvarado-Gil on California's Fair Plan

Published Date: 07/16/2024

Unlocking Homeowner Insurance Savings: Senator Marie Alvarado-Gil and the Future of California’s FAIR Plan

California’s homeowners are facing one of the most challenging insurance markets in decades — with premiums surging, coverage shrinking, and millions of residents forced 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 an in-depth conversation about the FAIR Plan, the new home-hardening discounts, and what real solutions might look like for families struggling to stay insured.

Their candid, on-location discussion revealed the emotional and economic weight of California’s insurance crisis — and the urgent need for reform, collaboration, and innovation.

Here’s what they uncovered.

The FAIR Plan: A Lifeline — or a Burden?

When Californians think of the FAIR Plan, many imagine a safety net designed for those living deep in wildfire-prone mountains or remote areas. But as Senator Alvarado-Gil explained, that image no longer fits 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.”

Originally created in 1968, the California FAIR Plan was intended to provide basic fire insurance for homes and businesses that couldn’t obtain coverage elsewhere. It’s not a government agency, but rather a state-mandated, private consortium of all insurers doing business in California.

It’s also a nonprofit, designed to hold minimal reserves and pay out nearly everything it collects.

In theory, the FAIR Plan shouldn’t generate profits — but as costs and claims continue to rise, even this safety net is straining under financial pressure.

“The Fair Plan president said they were in need of 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.”

Senator Alvarado-Gil: “I’m On the FAIR Plan Too.”

Unlike most policymakers, Senator Marie Alvarado-Gil isn’t speaking from secondhand reports — she’s living the crisis firsthand.

“I have the honor of being the only member of the state legislature that’s on the FAIR Plan,” she said. “So 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, Alvarado-Gil expected higher insurance costs. What she didn’t expect was massive year-over-year increases and shrinking coverage options.

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

Many of her constituents have faced similar issues — with deductibles skyrocketing to $10,000 or $20,000, and premiums exceeding 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 Purpose

The Senator’s experience underscores a larger problem: the FAIR Plan has become California’s primary insurer, not its last resort.

As traditional carriers withdraw from high-risk regions or stop writing new business altogether, millions of Californians have no alternative but to turn to the FAIR Plan.

That’s creating a dangerous imbalance.

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

The lack of competition has pushed costs up even further — and, ironically, made insurance less available for those it was originally designed to protect.

The Promise (and Limitations) of Home Hardening Discounts

One of the bright spots in the current system is the introduction of home hardening and defensible space discounts. These new incentives reward homeowners who invest in making their properties more fire-resistant — things like clearing vegetation, using fire-rated roofing, or installing ember-resistant vents.

The FAIR Plan was the first insurer in California to receive Department of Insurance approval for its home-hardening discount program.

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

However, both Susman and the Senator agreed: while the discount is a good start, it doesn’t come close to offsetting the thousands of dollars homeowners must spend to qualify.

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

And there’s another problem: Fair Plan inspections.

To prevent abuse, the FAIR Plan has announced that it will inspect 100% of properties applying for the discount — a huge logistical challenge.

“That’s a lot of staffing,” Susman noted. “They’ll give you the discount based on your signature, but it might take four months before they inspect. If you don’t qualify, they’ll take it back retroactively.”

The Deeper Issue: Prevention vs. Payout

Both Susman and the Senator agreed that California’s insurance culture needs to shift from claim response to risk prevention.

“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.”

That cultural shift — from expecting insurers to rebuild to incentivizing homeowners to mitigate — is essential for reducing long-term risk and stabilizing rates.

“The less claims that are paid,” Susman said, “the lower the premiums become. It’s math.”

Yet, as Alvarado-Gil pointed out, many homeowners lack the resources to invest in mitigation without stronger state or federal support.

Investing in Resilience: State Grants and Firewise Communities

The Senator emphasized that California is already investing millions in grants and incentives for wildfire mitigation and Firewise communities — but there’s still a gap between investment and action.

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

The key, she believes, is community collaboration — getting neighbors, counties, and local governments involved in maintaining defensible space and sharing the responsibility for risk reduction.

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

Equity and Fairness: Who Deserves Affordable Coverage?

The conversation also touched on the sensitive topic of risk-based pricing — and the perception that rural homeowners “choose” to live in risky areas.

“People say, ‘Well, you chose to live in the mountains,’” Alvarado-Gil said. “But that’s not fair. Everyone chooses where they live — whether it’s in a condo, next to a freeway, or near the coast. Every area has risk.”

Her point was clear: 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 — noting that California’s old “zip-code pricing” system is giving way to more granular, data-driven underwriting that may eventually reward homeowners who invest in mitigation.

“Carriers will soon be able to look at your house specifically — not just your neighborhood,” he said. “If you’ve cleared brush, installed vents, or have a well, that should make a difference. And soon, it will.”

The National Perspective: Could a Federal Solution Work?

In one of the most fascinating turns of the discussion, Susman brought up a little-known federal proposal from Congressman Adam Schiff — a bill that would have created a national catastrophe reinsurance program.

Under this plan, the federal government would replace existing programs like FEMA’s flood insurance, the California FAIR Plan, and the California Earthquake Authority with a single national disaster pool.

Private insurers would “pay to play,” purchasing reinsurance from the federal pool to protect against catastrophic events such as wildfire, flood, and earthquake.

“It’s fascinating,” Susman said. “It went completely under the radar — but it’s the kind of big-picture thinking we may need.”

The Senator agreed.

“I think that’s a great solution,” Alvarado-Gil said. “We have the technology, the wealth, and the intelligence to solve this. What we need is political will.”

Her office plans to raise the topic during upcoming advocacy trips to Washington, D.C.

The Broader Problem: California’s Climate Complexity

As Alvarado-Gil pointed out, wildfire is just one piece of the puzzle. Her district alone has faced flooding, mudslides, snowstorms, and droughts — all within a few years.

“California isn’t just wildfire,” she said. “We have extreme weather across the board — snow, floods, wind, even coastal erosion. We have to look at this holistically.”

That’s why she argues for a statewide resilience strategy, one that considers California’s vast diversity of climates and terrains.

“We all enjoy being Californians,” she said. “Whether it’s the coast, the wine country, or the mountains — we’re all connected. We need solutions that protect the entire state, not pit one region against another.”

The Path Forward: Reform, Resilience, and Realism

Both Susman and the Senator expressed cautious optimism about the state’s ongoing Sustainable Insurance Strategy — Commissioner Ricardo Lara’s plan to modernize rate-setting, 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, the plan could reduce reliance on the FAIR Plan, bring private carriers back, and create more accurate pricing models that reward risk mitigation.

Until then, both experts urged homeowners to stay proactive, document their efforts, and take advantage of available discounts and grants — however modest.

“Do what you can,” Susman said. “Protect your home, your neighbors, and your community. That’s how we build resilience from the ground up.”

Final Thoughts: Shared Responsibility, Shared Hope

In the end, Senator Alvarado-Gil’s story serves as both a warning and an inspiration.

Her personal struggle with insurance reflects the lived reality of thousands of Californians — yet her commitment to finding solutions shows what can happen when policymakers truly listen.

“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 embracing practical steps — hardening homes, applying for discounts, and advocating for reform. But it also means believing, as both the Senator and Susman do, that California can still lead the nation in building a fair, sustainable, and forward-looking insurance system.