The California FAIR Plan is an insurance program intended to provide access to basic property insurance when coverage cannot reasonably be obtained through the traditional insurance market.
FAIR stands for:
Fair Access to Insurance Requirements.
FAIR Plans aren’t unique to California.
According to the National Association of Insurance Commissioners (NAIC), FAIR Plans are state-mandated property insurance mechanisms that provide coverage to certain homeowners and businesses unable to obtain insurance through the regular market. They generally function as an insurance option of last resort.
California’s program has become particularly important because of the state’s significant wildfire exposure and changes in its property-insurance market.
Why Is California Changing the FAIR Plan?
The immediate backdrop is straightforward:
The FAIR Plan has become much more important than originally intended.
As private insurers became more selective about catastrophe exposure, more property owners turned to the FAIR Plan.
That increased pressure on:
- Customer service
- Claims operations
- Staffing
- Financial management
- Governance
- Policy administration
Then came the devastating January 2025 Los Angeles wildfires.
According to the California Department of Insurance, wildfire survivors subsequently reported problems involving:
delays + claim denials + communication difficulties.
The Department conducted a comprehensive examination of the FAIR Plan.
Its findings helped produce the proposed:
Make It FAIR Act.
What Did Regulators Find?
This is where the 2026 proposal becomes particularly significant.
The California Department of Insurance said its comprehensive examination evaluated the FAIR Plan across:
32 areas
involving matters such as:
- Financial condition
- Corporate governance
- Internal controls
- Consumer protection
According to the Department, the FAIR Plan had not started or fully implemented recommendations in more than half of those areas.
The Department specifically described 17 recommendations as critical.
That’s considerably more serious than a simple paperwork problem.
It suggests regulators are looking at how the organization actually operates.
Why “Technical Compliance” Isn’t the Whole Story
Insurance regulation has traditionally involved extensive technical requirements.
Insurers must comply with rules governing matters such as:
- Rates
- Policy forms
- Claims
- Financial solvency
- Licensing
- Consumer disclosures
- Market conduct
But regulators increasingly examine outcomes as well as procedures.
A company could theoretically have:
policy manual ✓
compliance department ✓
claims procedures ✓
while customers still experience:
delays + poor communication + inconsistent claims handling.
That distinction is important.
Compliance shouldn’t simply mean:
“We have the required procedure.”
The practical question becomes:
“Does the procedure actually protect policyholders?”
The Make It FAIR Act Targets Claims Handling
Claims are one of the central areas addressed by the proposal.
The California Department of Insurance says the legislation would strengthen claims handling and require the FAIR Plan to improve its operational capacity.
That matters enormously after a catastrophe.
Consider a homeowner whose property has been damaged by wildfire.
They may simultaneously be dealing with:
- Temporary housing
- Smoke damage
- Property repairs
- Lost possessions
- Contractors
- Mortgage payments
An insurance claim that becomes unnecessarily delayed can therefore create consequences extending far beyond paperwork.
Smoke-Damage Claims Are Part of the Dispute
Smoke damage has become particularly contentious.
The California Department of Insurance says it has taken formal legal action against the FAIR Plan concerning hundreds of smoke-damage claims.
The underlying issue demonstrates why claim interpretation matters.
A house doesn’t need to burn completely to suffer potentially serious damage.
Smoke can potentially affect:
- Walls
- Furniture
- HVAC systems
- Electronics
- Clothing
- Interior surfaces
Whether particular damage is covered ultimately depends on the policy and circumstances.
But regulators clearly see claims handling in this area as significant enough to warrant enforcement attention.
Customer Communication Is Becoming a Regulatory Issue
Insurance claims can involve complicated documentation.
But complexity doesn’t eliminate the need for communication.
Policyholders reasonably need to understand:
What information is required?
Has the insurer received it?
What happens next?
Why was something denied?
How can the decision be challenged?
The Department says delays, denials and miscommunication were among the leading complaints involving FAIR Plan policyholders following the January 2025 Los Angeles wildfires.
That makes customer communication more than simply a:
“service quality”
issue.
It can become part of regulatory scrutiny.
The Proposal Would Require More Staffing
One surprisingly practical provision involves staffing.
The Department says the legislation would require the FAIR Plan to hire additional personnel to address its growing operational workload, including claims and consumer complaints.
Why does staffing matter?
Because insurance infrastructure has to scale with policy volume.
Imagine:
100 claims adjusters → 20,000 claims
versus:
100 claims adjusters → 200,000 claims.
Even excellent procedures can fail when an organization doesn’t have sufficient operational capacity.
The FAIR Plan Could Offer Broader Coverage
Another major proposal involves coverage itself.
Traditional FAIR Plan coverage has generally been more limited than a conventional homeowners insurance package.
According to the California Department of Insurance, residential FAIR Plan policyholders currently may need separate coverage for risks including:
- Water damage
- Personal liability
- Other standard homeowners protections
The Make It FAIR Act proposes a more comprehensive homeowners coverage option.
This could potentially simplify insurance arrangements for some policyholders.
Why Homeowners Often Need a Difference in Conditions Policy
Because FAIR Plan coverage can be limited, homeowners commonly combine it with another policy.
This is often referred to as:
Difference in Conditions (DIC) coverage.
Simplified:
FAIR Plan
may provide certain core property protection.
Then:
DIC policy
may provide additional coverage not included in the FAIR Plan policy.
Together, the policies can more closely resemble broader homeowners protection.
But this arrangement can create:
- Additional premiums
- Multiple policies
- Multiple insurers
- More paperwork
- Potential confusion after a claim
A broader FAIR Plan coverage option could therefore be significant.
The Clearinghouse Is Another Important Piece
The long-term goal isn’t necessarily for consumers to remain in the FAIR Plan forever.
California has created mechanisms intended to help eligible policyholders move back into the voluntary insurance market.
The Department says its examination found that only some insurers participated in the relevant clearinghouse program, undermining the program’s intended effectiveness.
The proposed legislation therefore seeks improvements.
Conceptually:
FAIR Plan → temporary safety net → regular insurance market
is preferable to:
FAIR Plan → permanent destination.
Why Moving Back to Private Insurance Matters
Traditional insurance markets generally provide:
- More product choices
- More insurers
- Potentially broader coverage
- Competitive pricing
- Greater customization
FAIR Plans are designed primarily to preserve access when the traditional market isn’t providing sufficient options.
The NAIC describes FAIR Plans as mechanisms intended for properties that are high-risk or otherwise difficult to insure through conventional markets.
They are important safety nets.
But ideally, they shouldn’t replace a healthy competitive market.
What This Means for Businesses
The FAIR Plan isn’t only relevant to homeowners.
FAIR Plan mechanisms can also matter for certain commercial properties that struggle to obtain insurance.
Imagine a small business owns a building in a wildfire-exposed California community.
Private insurers either:
decline coverage
or quote terms the owner cannot reasonably obtain.
The FAIR Plan may become part of the property’s insurance solution.
That makes FAIR Plan:
financial stability + claims capability + governance
relevant to commercial property owners too.
Insurance Availability Can Affect Business Financing
Suppose a company purchases a:
$2 million commercial building.
The lender requires property insurance.
But traditional coverage becomes difficult to obtain.
Now insurance availability isn’t merely an insurance problem.
It becomes a:
financing problem.
Commercial lenders commonly require borrowers to maintain appropriate property insurance.
If insurance becomes unavailable or unaffordable, it can affect:
- Real-estate transactions
- Loan requirements
- Operating expenses
- Investment decisions
- Property values
The Bigger Issue: Insurance Accountability
The Make It FAIR Act fits into a broader regulatory theme.
Insurance companies and insurance-related organizations are increasingly expected to demonstrate not only that procedures exist but that those procedures produce appropriate outcomes.
That can involve:
Governance
Who is responsible?
Claims
Are claims being handled appropriately?
Transparency
Can consumers understand decisions?
Operations
Are sufficient resources available?
Controls
Can management identify problems?
Remediation
Are identified weaknesses actually corrected?
This is especially important when an insurer or residual-market mechanism becomes critical to an entire region’s insurance availability.
AI Makes This Even More Important
Insurance operations are becoming increasingly automated.
AI can now assist with:
- Underwriting
- Pricing
- Fraud detection
- Claims triage
- Customer service
- Document analysis
That creates another accountability question:
If an automated system produces an unfair outcome, is the insurer still responsible?
Regulators increasingly say yes.
For example, the Texas Department of Insurance issued an AI bulletin on June 12, 2026 stating that insurance decisions supported by AI must comply with applicable laws, including unfair-trade-practice and unfair-discrimination requirements. Texas also expects human review and agreement before consequential AI-supported decisions are acted upon.
AI Vendors Don’t Automatically Shift Responsibility
Suppose an insurer uses a third-party AI company.
The system recommends denying a claim.
The insurer says:
“The vendor’s algorithm made the decision.”
That doesn’t necessarily solve the insurer’s regulatory problem.
The NAIC’s AI framework emphasizes:
- Fairness
- Accountability
- Compliance
- Transparency
- Security
- Robustness
and its Model Bulletin tells insurers that decisions supported by AI remain subject to applicable insurance laws.
That means outsourcing technology doesn’t necessarily mean outsourcing accountability.
Documentation Is Becoming More Important
Insurers increasingly need to demonstrate:
What system made the decision?
What data was used?
How was the system tested?
Who approved it?
How is bias monitored?
How are errors corrected?
Texas regulators specifically state that insurers should maintain governance, risk-management controls and internal-audit functions around AI and may be asked for related information during regulatory examinations.
This reinforces the broader transition from:
“Tell us you’re compliant.”
toward:
“Show us how your controls actually work.”
What Should Insurers Do in 2026?
Insurers should treat regulatory compliance as an operational discipline rather than an annual checklist.
A strong framework should include:
Governance
Senior leadership should understand significant regulatory and operational risks.
Claims Oversight
Claims trends, delays, denials and complaints should be monitored.
Consumer Outcomes
Companies should look for patterns suggesting customers are being treated inconsistently.
Complaint Analysis
Complaints can reveal systemic problems.
Technology Governance
Automated decision systems should be documented and tested.
Vendor Oversight
Third-party service providers should be appropriately monitored.
Internal Audit
Controls should be tested rather than simply documented.
Remediation
Problems identified by regulators or internal reviews should actually be corrected.
What Should California Policyholders Do?
If you currently rely on the California FAIR Plan:
- Understand exactly what your FAIR Plan policy covers.
- Identify major exclusions or limitations.
- Determine whether you also have DIC coverage.
- Keep a current home or business property inventory.
- Maintain photographs and receipts.
- Review replacement-cost limits.
- Document mitigation improvements.
- Keep copies of communications after a claim.
- Ask for written explanations of important claim decisions.
- Review private-market alternatives periodically.
Most importantly:
Don’t assume “FAIR Plan” means identical coverage to a conventional homeowners or commercial-property policy.
Read both policies carefully.
Questions Business Owners Should Ask Their Broker
- Is the FAIR Plan my only realistic option?
- Which private insurers have been approached?
- What exactly does my FAIR Plan policy cover?
- What important coverage is missing?
- Do I need a DIC policy?
- Is wildfire included?
- What about water damage?
- What liability coverage do I have?
- Are my building limits adequate?
- What deductible applies?
- Are business contents adequately insured?
- Do I have business-income coverage?
- What mitigation improvements could help?
- Can I periodically be reconsidered for the private market?
- How would a major claim involving multiple policies be coordinated?
Frequently Asked Questions
What is the Make It FAIR Act?
The Make It FAIR Act is California Assembly Bill 1680, announced in February 2026 by Insurance Commissioner Ricardo Lara and Assemblymember Lisa Calderon. It proposes reforms involving the California FAIR Plan’s claims handling, coverage, governance, staffing and transparency.
Is the Make It FAIR Act a federal law?
No. This proposal concerns California’s FAIR Plan.
Is AB 1680 already law?
Readers should check the current legislative status before relying on any proposed provision. Because legislation can be amended during the legislative process, this article describes the proposal rather than presenting every provision as already effective.
What is the California FAIR Plan?
It is California’s residual property-insurance mechanism intended to provide basic coverage when qualifying property owners cannot obtain appropriate insurance through the conventional market.
Does FAIR Plan coverage equal standard homeowners insurance?
Not necessarily. FAIR Plan coverage can be more limited, which is why policyholders may purchase complementary DIC coverage.
Why is California reforming the FAIR Plan?
The proposal followed significant growth in FAIR Plan reliance, complaints following the 2025 Los Angeles wildfires and a Department of Insurance examination identifying governance, operational and consumer-protection concerns.
Does the proposal affect claims handling?
Yes. Claims handling and consumer service are among the major areas targeted by the proposed reforms.
Can businesses use FAIR Plan coverage?
FAIR Plan mechanisms can provide property coverage for certain eligible commercial risks unable to obtain coverage through the standard market, subject to program rules.
Does California want everyone to remain on the FAIR Plan?
No. An important policy goal is helping eligible consumers return to the regular insurance market where possible.
Are AI insurance decisions regulated too?
Yes. Existing insurance laws continue to apply when insurers use AI. State regulators increasingly expect insurers to demonstrate governance, testing, oversight and protection against unfair outcomes.
Final Thoughts
The most important lesson from California’s 2026 FAIR Plan debate isn’t simply about wildfire insurance.
It is about:
accountability.
An insurance organization can have:
rules + procedures + systems + policies
and still experience operational problems.
What matters to the policyholder after a catastrophe is whether the system actually works.
Can they reach someone?
Is the claim investigated?
Are decisions explained?
Are complaints resolved?
Are mistakes corrected?
California’s Department of Insurance says its FAIR Plan examination found that more than half of the 32 areas reviewed had recommendations that had either not been started or not fully implemented, including 17 critical recommendations.
The proposed Make It FAIR Act represents an attempt to turn those findings into structural reforms.
And it reflects a broader direction visible across insurance regulation:
Compliance on paper is necessary.
Effective governance, fair outcomes and demonstrable accountability increasingly matter too.
Quick Takeaway
California’s Make It FAIR Act (AB 1680) was announced on February 2, 2026 by Insurance Commissioner Ricardo Lara and Assembly Insurance Committee Chair Lisa Calderon. The proposal targets the California FAIR Plan with reforms involving claims handling, customer service, governance, transparency and coverage options. The legislation followed a California Department of Insurance examination that, according to the Department, found the FAIR Plan had failed to comply with 17 critical recommendations concerning financial condition, corporate governance and consumer protection.
The proposal matters because California’s FAIR Plan has become increasingly important as homeowners and businesses in wildfire-exposed areas struggle to obtain conventional property insurance.