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California homeowners may soon face new insurance surcharges, even if they live far from recent wildfire zones, as insurers seek state approval to pass along costs from devastating fires in Los Angeles County earlier this year.
Under a policy approved by Insurance Commissioner Ricardo Lara, at least 10 insurance companies have filed applications with the California Department of Insurance to begin charging their policyholders for a portion of a $1 billion assessment imposed by the California FAIR Plan Association. This emergency fee came after devastating fires in January that overwhelmed the state’s insurer of last resort.
The FAIR Plan, supported by the state’s licensed property insurers, reported paying $2.75 billion in claims from fires in Pacific Palisades, Altadena, and Sylmar in early May. Costs are projected to reach $4 billion. Because of the FAIR Plan’s insufficient financial reserves and reinsurance, it assessed its member insurers to cover the shortfall.
Now, those insurers seek to recover up to half of their assessment costs directly from customers — potentially burdening policyholders across California with annual surcharges ranging from $6 to over $60, depending on the type of policy and coverage level. Some homeowners could pay even more with larger or more comprehensive policies.
“This modest, temporary cost recovery — just a few dollars a month for most policyholders — is critical to preventing a catastrophic collapse of California’s insurance market,” said Denni Ritter, vice president for state government relations at the American Property Casualty Insurance Association.
Consumer advocacy groups argue the surcharges are unfair, especially for homeowners far removed from fire-prone areas. “The average doesn’t fully represent the impact on many homeowners, and $50 is not negligible for Californians who have already seen massive home insurance premium increases,” Carmen Balber, executive director of the nonprofit Consumer Watchdog, said.
The consumer group filed a lawsuit in April in L.A. County Superior Court, alleging Lara lacked the legal authority to authorize these surcharges without a formal rulemaking process. The group also contends the 1968 statute creating the FAIR Plan never envisioned such direct cost recovery from policyholders.
Michael Soller, a spokesperson for Lara, said the Department of Insurance is reviewing insurer applications to ensure they comply with established guidelines. “We also want to understand each insurer’s process to prevent overcollection. It’s about fairness, transparency, and holding insurance companies within legal bounds,” Soller said.
Affiliates of AAA, Mercury, Amica, and Western Mutual are among insurers seeking to implement surcharges. While not all insurers have filed yet, future applications are expected to follow similar patterns based on each company’s share of the state’s homeowners market, according to Rex Frazier, President of the Personal Insurance Federation of California.
Critics argue the policy may deepen the affordability crisis for homeowners grappling with limited insurance options. As insurers retreat from fire-prone regions, more homeowners have been forced into the FAIR Plan — which offers limited coverage and typically higher premiums. FAIR Plan enrollment nearly doubled between 2020 and 2024 in fire-prone areas like Pacific Palisades and Eaton Canyon, from 14,272 to 28,440 homes.
While the FAIR Plan has indicated another assessment related to the January fires is not currently anticipated, Frazier noted that future disasters could force additional charges. “I think the worry is what happens next November or December,” he said.
“There has to be a better solution than charging people hundreds of miles away for fires they had nothing to do with,” Balber said. “We cannot continue to shift private risk to the public with no end in sight.”
Meanwhile, a bill under consideration in the California Legislature could allow the state’s Infrastructure and Economic Development Bank to issue bonds to support the FAIR Plan’s liquidity, which may limit the need for future assessments and surcharges.
