California FAIR Plan to implement 29.1% rate increase

The California Department of Insurance has approved an average rate increase of 29.1% for the California FAIR Plan, the state’s insurer of last resort. This increase, effective October 15, represents one of the largest hikes in recent history and will apply to new and renewing policies.

Originally established in 1968 to curb redlining, the FAIR Plan provides basic fire coverage. It has seen a massive expansion in scale as major private insurers, such as State Farm and Allstate, have reduced their exposure to wildfire risks by canceling thousands of policies. The plan’s total exposure reached $768 billion as of June, a 250% increase since September 2022, while its direct cash balance remains between $200 million and $400 million.

Impacts of the rate hike will vary significantly by location. Homeowners in high wildfire-risk areas may see premiums double, whereas some residents in lower-risk urban areas could see reductions. The plan is funded by insurance companies licensed to operate in California rather than by taxpayers.