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California Proposes Major Insurance Reform
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California Insurance Commissioner Ricardo Lara is pursuing sweeping reforms for California's FAIR plan to stabilize the state's insurer of last resort.
In a press release issued on Wednesday, the California Department of Insurance said FAIR Plans' expansion in the last 10 years has revealed "flaws in a system that was never designed to bear the weight it now carries."
Under Proposition 103, insurance companies have been allowed to bypass high-risk areas including those prone to wildfires, leaving many homeowners and businesses in the state resorting to the FAIR Plan for coverage.
"The FAIR Plan needs to be a temporary option, not the only option," Lara said in the press release. "My top priority is for people to have more choices in a competitive market. And for those unable to find coverage right now, the FAIR Plan needs to provide the services and benefit payouts they deserve, quickly and fully."
Why It Matters
The reforms come amidst a crisis in California's insurance market, where increasing wildfire risk has led many providers to limit or abandon coverage.
The number of policies held on the FAIR Plan, which offers insurance to those who cannot find coverage on the market, has boomed in recent years. As of March 2025, the FAIR Plan's total policies in force is 573,739—a 23 percent increase since September 2024, and a 139 percent increase since September 2021.
What To Know
Through Lara's Sustainable Insurance Strategy, he is aiming to restore the FAIR Plan to a "temporary solution, not a permanent one," and to give Californians "more options and stronger protections." His reforms include:
Expanded coverage : Starting July 26, 2025, the FAIR Plan will temporarily offer high-value commercial coverage—up to $20 million per building and $100 million per location—through 2028, including coverage for HOAs and affordable housing.
: Starting July 26, 2025, the FAIR Plan will temporarily offer high-value commercial coverage—up to $20 million per building and $100 million per location—through 2028, including coverage for HOAs and affordable housing. Increased transparency : As of July 1, 2025, the FAIR Plan must publicly report exposures, policy counts, and financial data to inform policymakers and the public.
: As of July 1, 2025, the FAIR Plan must publicly report exposures, policy counts, and financial data to inform policymakers and the public. Market stabilization : In response to insurer withdrawals, Lara moved to stabilize the market and on June 23, 2025, urged dismissal of a lawsuit by Consumer Watchdog that he says undermines reform efforts.
: In response to insurer withdrawals, Lara moved to stabilize the market and on June 23, 2025, urged dismissal of a lawsuit by Consumer Watchdog that he says undermines reform efforts. Wildfire claims oversight : The Department of Insurance is investigating FAIR Plan responses to smoke damage claims from the Los Angeles wildfires and has directed improvements in staffing and claims handling.
: The Department of Insurance is investigating FAIR Plan responses to smoke damage claims from the Los Angeles wildfires and has directed improvements in staffing and claims handling. Operational review : A financial examination report on FAIR Plan operations, based on 2022 recommendations, is expected soon to assess progress on governance and service reforms.
: A financial examination report on FAIR Plan operations, based on 2022 recommendations, is expected soon to assess progress on governance and service reforms. New financial tools: Lara has co-sponsored Assembly Bill 226, allowing the FAIR Plan to seek bonds, loans, and credit lines—pending Insurance Commissioner approval—to expand fire insurance access.
An aerial view of a mobile home park destroyed by the Palisades Fire on May 7 in Pacific Palisades, California.
An aerial view of a mobile home park destroyed by the Palisades Fire on May 7 in Pacific Palisades, California.
Justin Sullivan/GETTY
What People Are Saying
Commissioner Lara said in Wednesday's press release: "Decades of neglect have created a crisis of availability. We want homeowners and business owners to have choices – not just a last resort. We cannot accept the growth of the FAIR Plan as inevitable. My continued reforms create the first-ever requirement for insurance companies to write policies in wildfire-distressed areas if they want to use forward-looking models or the cost of reinsurance in their rates. This is about reforming the limits of Proposition 103 and delivering on the promise of insurance access for every Californian."
What Happens Next?
Researchers at the comparison website Insurify have estimated that homeowner insurance premiums on the market will continue to rise this year, by as much as 21 percent throughout 2025, with an estimated average annual premium of $2,930, compared to $2,424 paid by California homeowners in 2024.
