This report examines the role of Fair Access to Insurance Requirements (FAIR) plans -- residual market mechanisms for the property insurance market -- and their effect on the availability and affordability of property insurance in urban markets.
The paper reviews the evidence of an urban insurance availability problem, the possible causes of the problem and the role of FAIR plans in addressing the problem. The report demonstrates that while FAIR plans ensure availability in the urban property insurance market, there is discrepancy among states as to the role and objectives of the individual FAIR plans. The most effective FAIR plans provide short term coverage, but have the ultimate objective of placing the risk back into the voluntary market. Plans which integrate loss control strategies into their operations are the most able to achieve this goal.
The report concludes with a proposal for a model FAIR plan. Based on the research of this study, an effective FAIR plan would, among other things: (1) provide a range of coverage options for consumers; (2) provide incentives to policy holders to reduce the risk of loss; and (3) increase communications between insurers and consumers of the urban insurance market.