FAIR Plan secrets: New bill would force transparency after CBS News California investigation

A year after CBS News California Investigates exposed concerning secrecy within the California FAIR Plan, state Insurance Commissioner Ricardo Lara is making good on his promise to change state law.

Lara announced legislation on Monday to require more accountability and transparency from the state's insurance of last resort.

The proposal follows a recent Department of Insurance examination that found the FAIR Plan failed to implement more than a dozen key recommendations related to governance, financial oversight, and consumer protections.

The Make It FAIR Act would mandate public access to FAIR Plan governing committee meetings and documents, including the creation of an annual public report — a transparency requirement prompted by CBS News California's investigation into the plan's secrecy. That annual report would be required to disclose information about the FAIR Plan's finances, governance structure, catastrophe response plans, and customer service performance.

The legislation would also require the plan to make sweeping changes, including offering a more comprehensive homeowners insurance policy similar to private insurers, hiring additional staff to speed up claims and complaints, improving programs meant to move policyholders back into the regular insurance market, requiring formal assessments of its financial exposure to future disasters, and adopting a three-to-five-year strategic plan to better prepare for future wildfires and storms.

The FAIR Plan is supposed to be California's insurance of last resort, but we found it is now the only option for many, even in low-fire-risk areas.

Now, those of us with regular insurance are on the hook for the FAIR Plan's debt, but we do not have the right to see its finances or find out what happens in the secret board meetings, where the big insurance companies make all the decisions.

Because a nonprofit association of private insurers runs the California FAIR Plan, its records and meetings have historically been shielded from public view under state law.

Just down the street from Helen Meisel's Pacific Palisades home, the neighborhood is still scarred by the Los Angeles wildfires.

Meisel said she has "mixed emotions" over the fact that her house was left standing from the fires. Months before the fires, Meisel said she was forced to switch to the FAIR Plan, which costs more and covers less.

"Double, more than double of what I was paying," she said. "I'm paying two policies, and I have not received a penny."

Sarah, who only wanted to be identified by her first name, was a first-time homeowner whose home survived a wildfire. But she said the FAIR Plan left her feeling like she would have been better off if it had burned down.

"They almost made me feel like I was going crazy," Sarah said.

Ken and Lisa, who also wanted to be identified only by their first names, were hoping to buy their dream home in a low-fire-risk area but couldn't get insurance.

"They said, 'I'm sorry, you're denied.' I was in shock," Lisa said.

Former Insurance Commissioner Dave Jones said the reason Californians should care about this "is that we're now on the hook, all of us, in case the fair plan runs out of money." And it did.

Jones added that the more homes forced onto the FAIR Plan, the harder it will be to cover claims after major disasters.

"Since we're all on the hook, we ought to be able to see what's in those financial statements," Jones said.

That was the heart of our CBS News California investigation, which found that the California FAIR Plan is the only insurer in the state that does not publicly disclose its financials. It's also the only FAIR Plan in the country without public board meetings, minutes, audits, and reports.

We asked insurance industry representative Rex Frazier to weigh in on our concerns.

"What do you say to the argument that since we're all on the hook, we ought to be able to see those financial statements?" CBS News California investigative correspondent Julie Watts asked. "We ought to be privy to the executive board meetings."

"You can understand how someone would have that opinion, but that's not the law today," Frazier said. "If you're suggesting the law should be changed, go out and make that argument."

We didn't need to because the insurance commissioner saw our reporting. Lara agreed that Californians being on the hook for the FAIR Plan's debt but not being allowed access to the plan's financials "should not be legal."

Following that interview, the FAIR Plan agreed to voluntarily increase transparency, but the only way to ensure accountability is to amend state law.

"Can you commit that when you come back and sponsor legislation before the end of this session, that it will require the fair plan to be at least as transparent as its member companies?" Watts asked.

"One hundred percent," Lara responded.

For Meisel, the proposed legislation is a big step forward.

"It needs to be accountable," she said.

For Sarah, it is about healing, but she said "what they put me through" is "pretty traumatic." Lisa warns that without action by lawmakers, "everybody's at risk. They can drop you like that."

Keep in mind, this is just the first draft. It will undoubtedly face opposition, and we will be covering the process and exposing what happens behind closed doors as this bill makes its way through the legislature.