The fire-insurance premium for Bill King’s home has risen 145% since 2017 — from $399 to $979 — under the California FAIR Plan, the state’s last option for homeowners seeking fire insurance.

Add that to the increase in his auto-insurance premium, and King, who lives in Running Springs in the San Bernardino Mountains, is worried.

“What do I do?” asked King, a retiree who will turn 70 years old this summer. “Do I move out of California? At some point I’m going to have to look at things… Will I be able to face future increases depending on how long I’ll live?”

A former Orange County employee, he said he’s having a tough time wrapping his head around the situation: “It’s hard when you’ve planned your retirement and your insurance company comes along and threatens your economic well-being.”

King’s story is similar to that of other property owners who have turned to the FAIR Plan as many insurers have stopped issuing fire insurance in the state, citing climate risks and inflation. As the FAIR Plan has exploded in size — from 126,709 policies in 2018 to more than 350,000 today — homeowners and insurance brokers say they are now facing problems such as delays in mortgage closings, or homeowners losing their coverage.

Recently, King found he was unable to pay for his policy renewal online, as he usually does. He couldn’t email the FAIR Plan because the plan’s website does not provide an email address. Instead, the website tells homeowners to contact their insurance brokers. King’s broker found out that he had been assigned a new policy number without his knowledge. He barely had time to send a payment via his broker, putting him dangerously close to cancellation. Based on his individual experience, King has concluded that the FAIR Plan “​​is doing everything it can to help policies lapse.”

The FAIR Plan Association, a pool of insurers required by state statute to provide fire-insurance policies when property owners can’t find them elsewhere, is experiencing major growing pains.

The California Insurance Department, which under state law has oversight over the FAIR Plan — including approving its requested rate changes — in 2020 investigated consumer complaints about non-renewals and cancellations. But even after an agreement late last year that included the FAIR Plan vowing to change some of its practices, there continue to be fresh signs of turmoil.

First: Bill King is an associate pastor at a church in Running Springs. Jan. 15, 2024. Last: A cross on the outside of Bill King’s home in Arrowbear Lake on Jan. 15, 2024. Photos by Julie A. Hotz for CalMatters

The plan is supposed to be a temporary solution as well as a last resort for property owners, but many people, like King, have been buying insurance through the association for years.

Hilary McLean, a FAIR Plan spokesperson, said the number of policy-holders who stay on the plan has increased over the years; 90% of current FAIR Plan customers are renewing their policies for another year.

The Insurance Department has proposed new regulations, expected to be finalized at the end of the year, to try to get insurers to resume writing fire policies in the state again. But it could be a couple of years until that happens, so the FAIR Plan is likely to continue growing, which could threaten its solvency because it is taking on additional high-risk policies.

“It’s clear that a growing FAIR Plan is a problem for all Californians because of the solvency risks from a major wildfire,” said Michael Soller, spokesperson for the Insurance Department, in an email. “The commissioner’s strategy is focused on returning people to the normal market from the FAIR Plan.”

Last year, lawmakers concerned about the solvency of the FAIR Plan tried to find a legislative solution to address it and other concerns about the state’s insurance market, but no lawmaker sponsored a bill to do so.

A copy of the proposed bill language, seen by CalMatters last week, shows it would have allowed the FAIR Plan to pay for claims by issuing bonds through the California Infrastructure and Economic Development Bank, which provides low-cost financing to state and local government entities. Although the FAIR Plan is not a state entity, the bill would have deemed it “in the public interest” for the FAIR Plan to qualify for financing through the bank.

FAIR Plan President Victoria Roach refused to speak on the record for this story. Spokesperson McLean said the association is dealing with an onslaught of new applications — about 900 a day, down from 1,000 a day last November but up from 350 a day in December 2022. Incoming phone calls nearly doubled over the last half of 2023, to more than 50,000 phone calls a month. The association has hired more people, bringing the number of staff to more than 200 employees plus 80 temporary workers, to help handle the additional workload.

Making matters worse, at the end of last year the FAIR Plan went ahead with long-planned changes to its software system, leading to confusion. McLean acknowledged that led to some homeowners getting kicked off the plan — or as King describes his case, almost getting kicked off — for payment issues.

Georgia, a Placer County homeowner who requested that her last name not be used for privacy reasons, said that in mid-December, her insurance broker informed her the day her premium was due that her payment had not been received, even though the money was in escrow and she later found out that her mortgage company had already paid it. The result: She, her husband and their three kids had to part with $2,380 right before Christmas to pay their premium because they didn’t want to risk losing fire insurance.

“That was my car payment, Christmas, everything we had,” she said. Her broker, mortgage company and the FAIR Plan told her she would get her money back on Jan. 5, she said, but added that she has yet to receive it.

Meanwhile, insurance broker Tyler Nelson said the new system caused delays that led to his clients losing out on loans for homes in escrow. Nelson said he would call the FAIR Plan, wait on hold for three hours and get no help. The new system, called Duck Creek, is “the most awful thing I’ve literally ever dealt with,” he said in an email.

The FAIR Plan would not discuss individual cases and complaints. McLean said the association notified brokers that they were adopting a new system, and offered them training and help. She also said the plan has made changes that “have greatly reduced delays and otherwise improved service levels.”

“In the very rare instance of a policy being canceled in error, the FAIR Plan works diligently to resolve the issue and restore coverage per the customer’s original policy agreement,” she added.

Soller, the spokesman for the Insurance Department, said consumers should contact the department if they have trouble getting coverage from the FAIR Plan.

Even before the FAIR Plan’s software transition, Ann Avalos lost her Auburn home’s fire-insurance policy in 2021 because of a payment issue after her mortgage was sold to another company.

The FAIR Plan “didn’t contact anyone until days before they dropped me,” she said, and refused to give her a grace period or reinstate her. “No communication, customer service, compassion,” she added. Her only recourse was to reapply for another policy, and she said her $2,257 annual premium increased to $3,481. Last year, she said it rose again, to $3,686. And because she can’t get fire insurance anywhere else, she has no choice but to accept the price increases.

Asked to respond, McLean said: “FAIR Plan policy agreements detail customer responsibilities… these responsibilities are consistent with industry standards, such as on-time payments and maintaining the structural integrity of the dwelling.”

“Why wouldn’t they drop you?” Avalos asked, noting that the association’s members are the insurers themselves. “Now they have the opportunity to double what they charge you.”

“We disagree with this characterization,” McLean said. “FAIR Plan rates are approved by the California Department of Insurance and rates are the same for new policyholders and renewing customers.”

A road in Arrowbear Lake on Jan. 15, 2024. Photo by Julie A. Hotz for CalMatters

The agreement reached by the Insurance Department and the FAIR Plan in November over complaints of non-renewals and cancellations between 2016 and 2019 has led the plan to make changes. One of them is to allow policy-holders to pay a surcharge if there’s a fixable issue on their property, instead of citing it as a reason to cancel their plan. Once the issue is taken care of, the surcharge is canceled. Soller, speaking for the state Insurance Department, said that because of the agreement, the FAIR Plan “should be making it easier, not harder,” for homeowners to renew their plans.

As King thinks about his own insurance worries and his future in California, he has also had to contend with FAIR Plan premium increases for his local church, where he is an associate pastor. A couple of years ago, he said, the fire-insurance premium for the church’s main building doubled from $4,000 to $8,000.

“That’s a lot of money for our little church,” he said, noting that the church’s annual budget was less than $70,000. So instead he shopped around and found a business policy that included fire insurance, which is costing the church about $6,000. “Insurance at times seems like a great evil perpetrated upon us,” he said.

###

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.