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Thousands of San Diego homeowners pushed onto expensive FAIR Plan due to home insurance crisis

The Growing Crisis of Home Insurance in California: A Look at the FAIR Plan and Regulatory Reforms

In the midst of California’s wildfire-prone landscape, homeowners like Paul Felber are facing a daunting challenge when it comes to securing insurance coverage for their properties. With insurance companies pulling back in the state due to high reinsurance and rebuilding costs, many residents are finding themselves forced onto the FAIR Plan, California’s insurer of last resort.

The FAIR Plan, originally designed as a safety net for homeowners without insurance, has seen a dramatic rise in policies in recent years. Between 2018 and 2022, the number of FAIR Plan policies in San Diego County more than tripled, reflecting a statewide trend that has put over 400,000 homeowners on the plan with a total risk exposure exceeding $311 billion.

The situation has left many homeowners in a precarious position, with limited options for insurance coverage and escalating premiums. Real estate transactions are being impacted, with escrows falling through due to insurance issues, and some buyers unable to secure policies in time to close deals.

In response to the crisis, California Insurance Commissioner Ricardo Lara has proposed a Sustainable Insurance Strategy aimed at moving homeowners off the FAIR Plan and back into the traditional insurance market. The plan would require insurance companies to write a significant portion of their market share in wildfire-distressed areas and allow them to use catastrophe modeling to assess risks and request rate increases.

While insurers generally support the proposal, consumer advocates like Consumer Watchdog are calling for more transparency and safeguards to protect homeowners from unfair price increases. They are also pushing for a rule that would give homeowners the right to purchase private insurance if they meet state guidelines for defensible space and home hardening.

As the state grapples with the challenges of a bloated FAIR Plan and a shrinking insurance market, homeowners like Paul Felber are left waiting for a solution that will provide them with more affordable and reliable coverage. With the fate of the insurance industry in California hanging in the balance, all eyes are on the regulatory reforms being proposed to address the crisis.

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