EL DORADO COUNTY, Calif. — In California’s home insurance crisis, hundreds of thousands of homeowners have been forced to find insurance through the FAIR Plan.
That’s the bare-bones, high-cost insurer of last resort. It’s state-mandated and privately run.
Kathy and Rich Arian live in the El Dorado community of Sierra Springs— certified Firewise because of its wildfire protections like removing problem trees and eliminating brush around homes.
The couple has lived in this home for 10 years, and when they first moved here, “we just had no problem getting our insurance. It was perfect coverage,” Kathy said.
A decade ago, their home insurance premium cost about $1,000 per year with a $100 deductible through AAA. But the company dropped them several years ago, and they were left with the California FAIR Plan. Their renewal quote for the coming year is $6,799 dollars—and that’s with a $10,000 deductible. The couple is on a fixed income.
“It's becoming almost untenable for us to do that,” Rich said. “We're retired.”
The Arians are left guessing about the breakdown of their FAIR Plan quote and want to see it itemized.
“There's supposed to be a deduction of 10% for the Firewise communities. I've sent the certificate; it’s never itemized that they take it out. I have to trust that they did,” Kathy said.
They compared notes recently with family. A niece in the Truckee area has a larger, more valuable home, yet she pays $500 less for her annual FAIR Plan premium. The Arians' home outside Pollock Pines is 1,492 sq. ft.; valued at $400,000 and has a $6,799 FAIR Plan premium with a $10,000 deductible. Kathy's niece in the Truckee area has a home that's 4,337 sq. ft; valued at $1,768,000 and covered by a FAIR Plan policy with a $6,300 premium and $7,500 deductible.
"Why is that home in Truckee not as expensive to insure as ours when it's worth four times as much and is three times larger?" Kathy asked.
ABC10 called up Aurora Mullett, who is managing partner at Sky Insurance Group, an independent insurance broker based in Rocklin.
“She's over five miles to a fire department. That alone is about a 60% increase in premium rates over somebody that is within that five-mile zone within a fire department,” Mullett said.
Two FAIR Plan premiums can differ widely, Mullett said, even among neighbors living on the same street.
“There might be different canyon exposure at the end of the street. So it's most frustrating when people are talking to their neighbors and they go, ‘Oh, well, we're vastly different,’” Mullett said.
Someone’s deductible will have a big impact on their premium cost, as well, she said.
ABC10 reached out to the FAIR Plan, asking them to explain what goes into their pricing.
In a statement, a spokesperson said:
“FAIR Plan customers are responsible for selecting the amounts and types of FAIR Plan coverage to purchase. Premiums are dependent on each property’s unique fire risk, discounts a policyholder may receive because of risk mitigation, the coverages selected and coverage limits. Insurance rates are approved by the California Department of Insurance. The FAIR Plan strongly recommends that consumers work with an insurance broker to obtain the amount of coverage that is right for them and to identify discounts for which they are eligible.”
Reacting to the statement, Kathy said, “And then they don't break those discounts out…They need to be transparent. Like every other insurance policy is, has all the deductions.”
If prices keep going up, the Arians say, they may have to move out of California—something they don’t want to do.
But as long as insurance companies keep limiting business in California, experts say, the FAIR Plan will continue to balloon, taking on more risk, which drives up prices.
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