EL DORADO COUNTY, Calif. — The California FAIR Plan is known as the fire insurance of last resort, but it is increasingly becoming many homeowners’ only option.
That’s because — over the past two years — most of the major companies in California’s homeowners insurance market have paused or restricted new business, driving people to the FAIR Plan.
That surge of new customers has led to issues with the FAIR Plan.
ABC10 first met Alison Welch back in Sept. 2021, as she and her family were finally allowed to return to their El Dorado County home after a 28-day evacuation due to the Caldor Fire.
The family lives in a beautiful wooded area between Pollock Pines and Kyburz, along Highway 50 and the South Fork of the American River.
When she and her husband bought the home in 2019, they paid $4,488 per year for their home’s fire insurance through the California FAIR Plan. That’s not including what they pay for flood insurance or additional homeowners insurance not related to fire, known as a Difference-in-Conditions policy.
Now, the Welches’ annual FAIR Plan premium is $12,127, nearly tripling in four years.
“I expected our rates to raise. I mean, a major fire just blew through here,” Welch said. “I didn't expect $7,000 in the four years we've been here. How long is this going to go on? When is it going to stop?”
ABC10 spoke with Welch again on Wednesday, after she posted on Facebook about an issue she discovered with her FAIR Plan coverage.
“We haven't had fire insurance since December,” she told ABC10. “We just got it reinstated this week.”
Her premium was due Dec. 24, she said. Her lender sent the payment Dec. 15, but the FAIR Plan didn’t receive it until Dec. 27 and canceled her policy.
“My policy was canceled for lack of payment, even though they got the check and they cashed it,” Welch said. “Should my lender maybe have sent it out a little bit earlier? Probably. But that's not on me; that's on the lender.”
She said she didn’t receive any notice of cancelation and only learned about it recently.
She and her broker were able to fix the situation, but Welch said, of the FAIR Plan, “I shouldn't have to deal with this. My lender paid you guys. Do your job. If you are understaffed, beef up the staffing.”
ABC10 reached out to the California FAIR Plan. For privacy reasons, a spokesperson said, it doesn’t comment on specific cases, though he said he was glad to hear from ABC10 that Welch had been able to rectify her situation.
Generally, he said, “the FAIR Plan has experienced historic growth, and more Californians are continuing to turn to it for the coverage they need. The FAIR Plan is receiving approximately 1,000 applications per business day and the vast majority of them are being processed within five business days.”
That growth, plus a switch to new software back in October, led to some issues, the spokesperson said.
“To address these challenges, the FAIR Plan dramatically increased staffing, including tripling customer service representatives and doubling the underwriting team. These changes have greatly reduced delays and brought service levels back to a more normal level,” he said.
Aurora Mullett is managing partner of Sky Insurance Group, an independent insurance broker based in Rocklin. ABC10 asked her what her recent experience has been with FAIR Plan policies.
“Hold times definitely have improved,” Mullett said. “Application process, it's very hit-or-miss… Some policies will return back in two hours, and some can take two weeks.”
The Welch family isn’t alone in having issues recently with the FAIR Plan, she said.
“The one thing I don't want to do is to demonize the FAIR Plan, because they didn't ask for any of this. It's just their new system, on top of State Farm leaving, on top of all these things that happened - was the perfect storm to where they're just inundated.”
Recent issues with the FAIR Plan comprise just one part of California’s broader insurance crisis, which leaves many customers with few or no choices.
“It's either pay your insurance or lose your house,” Welch said.
ABC10 also reached out to the California Department of Insurance. They acknowledged recent issues the FAIR Plan has had and said they’re concerned too.
Back in December, Insurance Commissioner Ricardo Lara sent the President of the FAIR Plan a letter, flagging concerns about unacceptable delays and payment problems — like what Welch experienced.
At the Department’s request, the FAIR Plan now has a dedicated inbox specifically for FAIR Plan brokers to submit their inquiries.
Also, the Department of Insurance now requires the FAIR Plan to offer a monthly payment plan, which any new customer can select when the policy is quoted and any existing policyholder can choose at or after their renewal, according to a FAIR Plan spokesperson.
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