Special Report: FAIR Plans in a Few PIA Western Alliance States

The insurance crisis in California is driving a lot of homeowners to the state’s insurer of last resort, the FAIR Plan. Some in the insurance market say the FAIR Plan isn’t playing all that fair.

Neera Sharma is the president of the wholesale brokerage, Wholesale Brokers Insurance Services. Her company has been tiptoeing through the state’s very volatile insurance market. It appears her biggest competitor these days is the FAIR Plan — a system that’s supposed to be an insurer of LAST resort.

But these days, it appears the FAIR Plan is more and more becoming the insurer of first resort.

“Most of the time, what we're hearing back is, ‘Hey, Nira, our client has decided to go with the FAIR Plan property quote,’” Sharma said. “So can you just quote the GL?” That leaves brokers like Coastal providing only general liability (GL) coverage, while the FAIR Plan captures the property portion. We’re not losing to another private insurer. We’re losing the business to the FAIR Plan.”

In New Mexico, Superintendent of Insurance Alice Kane has increased the maximum residential property limit to $750,000 from the current $350,000 cap. The FAIR Plan board of directors has approved the increase and it will stay in place until June 20th.

Kane says it’s a placeholder until the Legislature acts. Senate Bill 81 was introduced in January and it proposes to raise personal property limits to $750,000 and a commercial property coverage limit of $2 million.

In Nevada, the Legislature is pushing for the creation of a FAIR Plan. Assembly Bill 437 will establish a plan for personal and commercial property insurance in areas where the usual coverage can’t be purchased. The bill — if passed — will force all insurers to participate and share the FAIR Plan’s financial obligations.

Under the bill, personal property limits will be $750,000 and commercial property limits will sit at $5 million. A nine-member board will oversee the FAIR Plan.

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