The California Fair Insurance Plan – Not So Fair

Homeowner insurance providers across California are swiftly canceling policies, leaving countless homeowners in a dire situation. The process appears arbitrary – a mere dart thrown at a map designates an area as high risk, prompting policy cancellations.

Cancellation without property inspection:

Recently, I experienced this firsthand when the insurance company I’ve faithfully been with for nearly 40 years abruptly canceled my policy due to wildfire concerns. Despite implementing defensible space measures and residing near a fire hydrant just 900 feet away, along with being within close proximity to a fully staffed fire department, as well as USFS and CalFire stations within three miles, none of these precautions seemed to matter to them. Over the past four decades, this insurer has pocketed over $250,000 in premiums from me for a “just in case” scenario. It’s a legal requirement to have homeowners insurance if you have a mortgage, yet insurers have been profiting immensely, especially in California, where they’ve raked in billions until recently facing losses due to wildfires. Farmers, the company I’ve been dealing with, boasts $17 billion in assets (2019). The recent panic among corporate insurance billionaires due to wildfires threatening their lavish lifestyles is alarming.

The Fair Plan

Enter the Fair Plan, available in about 29 states, including California. This state-run program serves as a last resort for obtaining insurance after being canceled by private insurers. However, the coverage it offers is exorbitantly expensive, covering only fire, lightning, internal explosion, and smoke damage. No coverage is provided for personal property, theft, snow load, roof damage, or other hazards. If you desire additional coverage, you’ll have to pay thousands more.

Since 2006, my homeowners insurance premiums have skyrocketed from $1,200 to $4,600 last year. With the Fair Plan, we anticipate paying significantly more annually for uncertain coverage. Many others have seen their policies increase by 35% to 50% or more, solely due to the Fair Plan’s limited coverage compared to comprehensive policies. It raises questions about where all this money is going.

How I believe the Fair Plan Works

Here’s how I believe the scheme works: Insurers are obligated to participate in the Fair Plan, which spreads out high-risk policies among them. Under the guise of the Fair Plan, policies are issued with reduced coverage for substantially higher premiums, generating billions more in profits, unless a disaster strikes. Insurance companies double dip because the Fair Plan only covers specific risks, prompting the sale of additional policies to cover other risks, leading to higher commissions for insurance agents/brokers.

Transparency is severely lacking in this scheme. The California Department of Insurance fails to disclose financial details, leaving consumers in the dark about where their money is going. This lack of transparency is deeply concerning, especially when taxpayers are footing the bill. Financial statements are conspicuously absent from their website.

This is an egregious scam. Insurance companies cancel policies, issue new ones under the Fair Plan with diminished coverage and inflated premiums, and then charge additional fees for the coverage that was lost. The profits swell their coffers, shielded by the opaque umbrella of the Fair Plan.

The Impact

Imagine shelling out up to $1,000 a month from your hard-earned salary just for homeowners insurance. It’s outrageous and borders on criminal. This reality is driving people away from California, with its exorbitant utility rates, sky-high taxes, and inflated fuel prices.

When I receive my new proposal from the Fair Plan, along with my regular insurance coverage, I’ll share the details. But for now, it’s clear that 350,000 homeowners in California are being exploited. It’s extortion, and it’s unacceptable.