Quick Take
Nearly 11,000 Santa Cruz County residents insured through California’s FAIR Plan could face average fire insurance rate hikes of nearly 36% starting in 2026 as part of a statewide proposal submitted to the Department of Insurance. The increase reflects rising wildfire risks and insurance market shifts, though regulators say new rules are aimed at stabilizing coverage statewide.
Nearly 11,000 Santa Cruz County residents who are insured by the California FAIR Plan, a fire insurance pool of private insurers that acts as a last resort for people unable to get coverage in the traditional market, could see their rates rise starting next year by an average of nearly 36% under a proposal submitted to the state Department of Insurance last month.
The proposed local increase mirrors the FAIR Plan’s statewide increase of 35.8%. Individual policyholders won’t all see their rates grow at that rate, but will see hikes or drops depending on their fire risk and other factors.
In Santa Cruz County, the ZIP code 95017, which includes Davenport and parts of North County, would get the lowest average increase of 9%, while the Brookdale ZIP code 95007 would get the highest increase of 50.9%.
As fires have become more frequent and devastating in recent years, and insurers have pulled out of California, more residents, including those in Santa Cruz County, have found themselves with no other option but the FAIR Plan. The plan is often more expensive than those from other insurers and only provides coverage for fire damage, which means homeowners have to pay for a second homeowner’s policy to cover other potential risks like damages from a tree falling on a roof.
FAIR Plan spokesperson Hilary McLean told Lookout that the plan’s rates must be able to sufficiently pay for the cost of claims and losses from high-risk consumers and also pay for the high-risk insurance pool’s operating expenses.
“The FAIR Plan insures all properties that meet its minimum underwriting guidelines, regardless of their exposure to wildfire risk, which results in the FAIR Plan having a very high concentration of policies in the riskiest areas of the state,” she wrote. “The premiums must reflect that risk.”
Submitted Sept. 29, the FAIR Plan proposal is under review by the California Department of Insurance. The approved rates, which could be reduced or adjusted, would go into effect for policy renewals after April 1, 2026. While 35.8% is the average statewide rate increase, individual policyholders could see a wide range of rate increases or decreases, depending on their property’s fire risk. A department spokesperson told Lookout that it doesn’t have a set decision date.
Several commercial insurance companies have also proposed hiking rates but not as much. For example, Mercury Insurance filed a proposal for an average increase of 6.9%.
Under previous rate guidelines used by the Department of Insurance, the increases included in the FAIR Plan proposal would have been even higher at 80%, according to state insurance officials. It’s not clear why the rate would have been that much higher, but McLean said the rate hikes reflect the FAIR Plan’s “current risk portfolio, expenses and growth.”
But earlier this year, the state insurance regulators changed how insurance companies can determine rates. Now, they can include the estimated future risk of fire, called catastrophe modeling, as well as the insurer’s cost of insurance, or reinsurance. In exchange, the companies agreed to write more policies in California.
Average increase by ZIP code
- 94060 Pescadero – 15.1%
- 95003 Aptos – 38.3%
- 95005 Ben Lomond – 46.8%
- 95006 Boulder Creek – 47.7%
- 95007 Brookdale – 50.9%
- 95010 Capitola – 20.6%
- 95017 Davenport – 9%
- 95018 Felton – 49.5%
- 95019 Freedom – 22.3%
- 95033 Los Gatos – 27.4%
- 95041 Mount Hermon – 50.5%
- 95060 Santa Cruz – 32.8%
- 95062 Santa Cruz – 24.1%
- 95064 Santa Cruz – 37.2%
- 95065 Santa Cruz – 41.5%
- 95066 Scotts Valley – 43.4%
- 95073 Soquel – 41%
- 95076 Watsonville – 33.9%
The Department of Insurance says these changes, part of its Sustainable Insurance Strategy, are meant to increase the number of insurance companies doing business in the state and reduce the number of policyholders on the FAIR Plan. The strategy is the department’s plan to address rising insurance costs and the departure of insurance companies from California amid rising climate disasters.
Department of Insurance Press Secretary Gabriel Sanchez said the new rules in the Sustainable Insurance Strategy brought down the proposed rate. He told Lookout via email that the changes require that insurers return to offering policies in higher-risk fire areas and provide more options to homeowners who would otherwise turn to the more expensive FAIR Plan.
“This marks a significant change from when insurance companies frequently raised rates, canceled existing policies, or stopped writing new ones,” he wrote. “We are observing early signs of market improvement, even in the wake of the severe L.A. wildfires.”
Still, the FAIR Plan has faced mounting criticism for how it is processing claims from January’s devastating Los Angeles County wildfires. Homeowners in Altadena and Pacific Palisades filed lawsuits accusing the plan of failing to adequately test for smoke damage, according to the Los Angeles Times. A judge ruled in June that the FAIR Plan’s smoke damage policy was in violation of state law.
Editor’s note: Are you on the FAIR Plan and open to sharing your thoughts on the proposed rate hikes for a follow-up story? Email the reporter at hillary@lookoutlocal.com.
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