Fair Access to Insurance Requirements Plans

Last Updated: 3/20/2024

Issue: FAIR plans, also known as Fair Access to Insurance Requirements plans, are state-mandated property insurance plans that provide coverage to individuals and businesses who are unable to obtain insurance in the regular market.  These plans are typically used as a last resort and provide basic coverage for properties that are considered high-risk or difficult to insure due to factors such as location, age, or type of construction. 

Insurance FAIR plans were created as a response to the problem of insurance market unavailability, which occurred when insurance companies stopped providing coverage to high-risk properties and individuals in certain geographic areas. This was due to a combination of factors, including natural disasters, changes in building codes, and rising insurance costs. 

Background: The resulting lack of insurance options for these high-risk properties and individuals led to the creation of FAIR plans as a solution to provide them with access to basic insurance coverage. The goal of FAIR plans is to ensure that everyone has access to insurance, regardless of their property's risk factors or location.

Fair Access to Insurance Requirements (FAIR) plans were implemented in twenty-six states, the District of Columbia, and Puerto Rico pursuant to the Urban Property Insurance Protection and Reinsurance Act of 1968 to mitigate urban deterioration by reducing unfair insurance practices. Since the creation of the first FAIR plan, similar plans have been established in other states, providing access to insurance for high-risk properties and individuals. The FAIR Plan serves as an important backstop for the public by making insurance available in all high-risk areas.

While these plans are instituted at the state level, they’re financially backed by all private insurers licensed to write insurance in that state. Each of these companies shares in FAIR Plan profits, losses, and expenses at an amount proportional to its market share in the state. This allows multiple insurance companies to share the risk of the most high-risk homes, rather than just one company.

FAIR plans are typically more expensive and have limited protection than insurance obtained in the regular market. These plans are typically only intended to provide coverage for catastrophic events. FAIR Plan insurance coverage varies by state, but at the very least it usually includes dwelling coverage. Coverage for personal belongings and additional structures on the property are usually only offered as optional policy add-ons. Generally, loss of use and personal liability coverages aren’t offered via FAIR plans.

Many states in the United States have some form of FAIR plan, although the specific structure and regulations vary by state. Some states have a single state-run plan, while others have multiple plans operated by different insurance companies. The states that have their own FAIR plans include California, Florida, Hawaii, New York, and North Carolina, among others. Additionally, some states have residual market mechanisms, such as assigned risk plans, which serve a similar purpose to FAIR plans.

As such, FAIR plans were designed to be actuarially sound rates were commensurate with risk to preserve their solvency and not interfere with the insurance market’s fundamental supply-demand equilibrium. 

Over time, however, the mission of FAIR plans broadened as these plans are increasingly viewed as tools for promoting economic development in coastal areas and providing low priced insurance. In some areas, beach, and windstorm plans (a type of FAIR plan in coastal states) insured more risks than were insured in the voluntary market. Over 10% of Florida homeowners have insurance through the state’s FAIR Plan sold through Citizen’s Insurance as of March 2022 and that number is only expected to rise.

The NAIC's Property and Casualty Insurance (C) Committee is charted with monitoring and responding to problems associated with products, delivery, and cost in the P&C insurance market including issues of accessibility and affordability of coverage. Additionally, the Climate and Resiliency (EX) Task Force coordinates the NAIC's climate-risk and resiliency activities.