What is the FAIR Plan?
The Fair Access to Insurance Requirements (FAIR) Plan is a program designed to provide property insurance coverage for homeowners and businesses when coverage is unavailable through traditional means. HB23-1288, establishing the FAIR Plan, was passed by the legislature and then signed into law by the Governor on May 12, 2023.
Why was the FAIR Plan created?
The FAIR Plan was created to address situations where insurance companies may refuse coverage due to high-risk factors, such as the property’s location or vulnerability to certain perils such as wildfires. It ensures homeowners and businesses in Colorado have access to insurance even in areas prone to natural disasters or other risks.
What is the Current Status of the FAIR Plan?
Timeline for FAIR Plan Operations
HB23-1288 Fair Access to Insurance Requirements Plan (FAIR) Plan was signed into law by the Governor on May 12, 2023. The State of Colorado is accepting applications to serve on the Board of Directors through August 1, 2023. The Board will be appointed by the Governor by January 1, 2024. The Board will submit a Plan of Operation to the Division of Insurance by July 1, 2024.
Access to FAIR Plan policies is not expected until early 2025.
Apply to Serve on the Board of Directors
The State of Colorado is seeking qualified individuals to serve on the Board of Directors. The Board will be made up of representatives from insurance companies, consumer advocates, and industry professionals - see additional details below. Interested individuals must complete this application from the Colorado Office of Boards & Commissions. When applying, please indicate which of the seats listed below you are seeking to fill.
Interested individuals are encouraged to submit an application by August 1, 2023. In accordance with HB23-1288, Board members will be appointed by the Governor by January 1, 2024.
By law, Board members must represent the following interests:
- Two individuals representing admitted mutual insurers writing property insurance in Colorado
- Two individuals representing admitted stock insurers writing property insurance in Colorado
- One individual representing a Colorado-based insurance trade organization that represents insurers of various property interests;
- One member representing a Colorado-based insurance trade association that represents independent insurance agents licensed to write property and casualty insurance in Colorado;
- One insurance producer licensed to write property and casualty insurance in Colorado
- Two individuals representing the interests of consumers and, to the extent practicable, representing consumer advocacy organizations and diverse geographic areas of the state.
Board terms are for three years, except that, to ensure staggered membership, some of the initial appointments will be for one or two year terms.
The Board must submit a Plan of Operation to the Division of Insurance by July 1, 2024.
How will the FAIR Plan work?
- Coverage Availability: The FAIR Plan will provide up to $750,000 in property insurance coverage and up to $5 million in commercial property insurance to eligible individuals and businesses in Colorado.
- Policy Options: The FAIR Plan will offer property insurance policies that meet the requirements set by the Board in its plan of operations, ensuring fair and adequate coverage for policyholders.
- Premium Assessment: Member insurance companies share expenses, income, and losses based on their written premiums for property and commercial property insurance, ensuring a fair distribution of costs.
Benefits of the FAIR Plan
- Access to Coverage: The FAIR Plan will ensure that homeowners and businesses have access to essential property insurance coverage, even in high-risk areas.
- Financial Protection: Policyholders will gain financial protection against property damage or loss caused by covered perils such as wildfires.
- Stability and Peace of Mind: The FAIR Plan will provide a safety net to ensure Coloradans aren’t left without essential insurance protection for their property promoting stability and peace of mind.
- Fairness and Equity: The FAIR Plan operates on a fair and equitable basis, spreading costs among member insurance companies to prevent an undue burden on any individual insurer or policyholder.
Frequently Asked Questions for Board Applications
What is the Fair Access to Insurance Requirements (FAIR) Act?
A: The FAIR Act is legislation aimed at ensuring Colorado property owners have access to homeowners and commercial property insurance, recognizing the impact of climate change on insurance markets.
What is the FAIR Plan Association?
A: The FAIR Plan Association is a nonprofit entity authorized by law to ensure the availability of property insurance when not obtainable from standard insurance companies.
What is the Board of Directors' role in the FAIR Plan Association?
A: The Board governs the Association and oversees the FAIR Plan's administration. Its members are appointed by the Governor and include representatives from different sectors related to insurance.
How does the FAIR Plan work?
A: The Board of the Association establishes the FAIR Plan to provide property insurance at actuarially sound rates. The FAIR Plan Association is a special purpose insurance company and will have to perform all the functions of a company.
What does the Plan of Operation entail?
A: It outlines the FAIR Plan details, including insurance coverage lines, coverage limits, policy forms, covered perils, and underwriting standards. The Board will be responsible for choosing and retaining a program administrator and staff to manage services to consumers.
Who are Member Insurers?
A: Member Insurers are companies offering property insurance. They automatically become FAIR Plan Association members, as a condition of their insurance business operations in Colorado.
What is the Board’s responsibility towards the Commissioner?
A: The Board submits an annual report to the Commissioner about the FAIR Plan and can amend the Plan of Operation at the Commissioner's request or on their own initiative.
How are consumers made aware of the FAIR Plan?
A: The Association establishes a public website and toll-free phone number providing information about the FAIR Plan.
What are the term limits for the Board members?
A: Board members serve three-year terms, and can serve up to four terms, with initial appointments staggered for continuity.
Who fills a Board vacancy?
A: The Governor appoints a new member to complete the term of a vacated seat.
How much time should a board member commit each month?
A: It is anticipated that, during the start up phase, Board members will have a significant time commitment. Initially, board members may commit around 15-20 hours per month, decreasing to about 5-10 hours once the Board and Plan of Operation are established.
Are board members compensated?
A: Board positions are voluntary and uncompensated.
Where are board meetings held?
A: The Board will decide the frequency and location of meetings and whether meetings will be held virtually to accommodate participation from anywhere within Colorado.
What are the responsibilities of a FAIR Plan Association board member?
A: Board members are tasked with:
- Governing the Association
- Establishing the FAIR Plan in accordance with legislative requirements
- Submitting an annual report to the Commissioner
- Amending the Plan of Operation as needed
- Assisting in appointing new members in case of vacancies
What will be my role in the Plan of Operation as a board member?
A: As a board member, you'll help:
- Shape the board's mission and vision
- Define applicant eligibility criteria
- Develop standardized insurance policies
- Oversee underwriting rules and rate calculation
- Decide on risk sharing among participating insurers
- Make decisions on funding mechanisms
- Oversee operational aspects like claims handling
- Formulate communication plans for customers and stakeholders
- Conduct regular reviews and adjustments for efficient service delivery
For more information about the FAIR Plan, please contact Debra Judy (debra.judy@state.co.us) or Keilani Fleming (keilani.fleming@state.co.us).