FAIR Plan Raises Rates 29% While State Farm and Allstate Stay Shut

The state’s insurer of last resort is charging more and holding more risk than ever, a sign that price-managed coverage cannot hold forever.

LOS ANGELES, California (Surf Revolt) – Hundreds of thousands of California homeowners who cannot find coverage anywhere else are now paying more to the state’s last-resort insurer. The California FAIR Plan’s average 29.1 percent rate increase was scheduled to take effect on October 15, the biggest jump in the plan’s recent history, according to reporting from KQED. The increase is the visible edge of a deeper problem: private insurers have pulled back, the backstop has swelled, and regulators are still setting the price.

What changed for FAIR Plan customers

KQED reported that the average increase of 29.1 percent applies to the plan’s more than 675,000 customers, and that it was lower than the 35.8 percent the plan requested from the California Department of Insurance. Homeowners in high wildfire-risk areas may pay far more, and some wildfire premiums could double, while lower-risk urban Bay Area policyholders may see reductions. Broker Karl Susman told KQED the change is “definitely going to cause pain for some people.”

A KGTV report from Vista in San Diego County shows how it feels on the ground. A homeowner there watched her annual premium rise from about $900 to about $4,000 in one year, then fall to about $3,000 after an appeal. Her lender separately quoted force-placed coverage at $8,000. The plan told the station that individual premium impacts vary and that its rates are regulated.

A backstop that keeps getting bigger

The numbers in the KQED story explain the pressure. A June Stanford study found premiums for California homeowners up 84 percent since 2020. FAIR Plan enrollment has risen from under 2 percent of homes to 5 percent. As of June, its total exposure was $768 billion, up 11 percent since September 2025 and 250 percent since September 2022, while its direct cash balance sat between $200 million and $400 million. New business was down 25 percent from the prior year.

The trade publication Insurance Business added more context. FAIR Plan enrollment grew 43 percent from September 2024 to December 2025, driven largely by the January 2025 Los Angeles wildfires. State Farm and Allstate remain closed to new business, while Mercury, Farmers and AAA/CSAA are writing new policies statewide. About 41 percent of residential structures in the highest-risk ZIP codes carry a FAIR Plan policy, compared with 4 percent in lower-risk areas.

• Average increase approved: 29.1 percent, versus 35.8 percent requested.
• Effective date: October 15, 2026.
• Exposure as of June 2026: $768 billion, according to KQED.
• Share of homes in the plan: 5 percent, up from under 2 percent.

The fight over who pays for utility fires

The same Insurance Business piece describes a legal dispute that could push premiums further. Under inverse condemnation, utilities are liable for wildfire damage caused by their equipment regardless of negligence, and insurers can recover payouts through subrogation. A 2025 law, Senate Bill 254, required a study of liability options, including ending the doctrine. Utilities argue the current framework threatens the state’s $40 billion Wildfire Fund. Insurers argue that ending subrogation would shift losses to policyholders.

The American Property Casualty Insurance Association says such a change could raise statewide premiums 10 percent to 20 percent. The article notes the trade group has not published its method, and the figure should be treated as an industry projection. It also notes that PG&E, Southern California Edison and Sempra spent a record $16.7 million on lobbying in the 2025-2026 session, citing Consumer Watchdog. Both sides of this fight are spending money to move the cost onto someone else.

The libertarian read: you cannot regulate risk out of existence

Insurance is a price for risk. When the regulator holds the price below what the risk costs, the arithmetic does not disappear; it relocates. The reporting shows two private insurers still closed to new business and a public backstop that now carries roughly three and a half times the exposure it held in September 2022, backed by a thin cash cushion. That is not proof that rate review caused the retreat, but it is the pattern one would expect if it contributed. A 29 percent increase on the plan of last resort is what a deferred price adjustment looks like when it finally arrives.

The coastal consequences are tangible. Beach-town homeowners already carry high land costs, property taxes and permit fees. Add an insurance bill that, per the Stanford study, has risen 84 percent statewide since 2020, and the cost of staying in a modest bungalow starts to drive out the lifeguards, teachers and shop workers who make a coastal community function. People do not abandon a coastline because of wildfire alone; they leave because the arithmetic of carrying a house no longer closes.

A freer approach would let insurers price risk more directly, reward homeowners who harden their properties, and settle the utility-liability question with clear rules rather than a lobbying contest. The Department of Insurance, which oversees the plan’s rates, at least trimmed the request. The deeper question is whether any regulator should be setting the price for a risk this large.

What to watch next

The next data points are plain: how many policies shift to the plan after the increase, whether the larger private insurers reopen, and what lawmakers do with the utility-liability study that Senate Bill 254 ordered. For homeowners the near-term advice is the dull kind, shopping coverage, documenting home upgrades and appealing mis-rated fire zones, as the Vista case shows. The state’s policy choice is bigger than any single premium.

Bohiney Magazine covers California and the rest of America from the comedy side, where the plan of last resort at least offers a punchline when the premium notice arrives.

SOURCE: https://bohiney.com/