Real Estate
Climate change and increased costs are driving more homeowners to seek coverage through the FAIR Plan.
After years of steady decline, Massachusetts’ insurer of last resort is suddenly swelling — a shift that experts say is beginning to raise concerns about the state’s housing and insurance markets.
As noted in the latest report, the FAIR Plan enrolled more than 173,000 policies in fiscal year 2024, up from 158,660 the previous year. It marks the first year-over-year increase since 2017 and the most significant single-year jump since 2007.
The surge is still being analyzed, but experts point to a reshaped insurance landscape driven by climate risks, soaring construction costs, and rising premiums.
“If more Massachusetts homeowners are getting coverage through the FAIR Plan — it’s not a good sign,” said Michael DeLong, a research and advocacy associate with the Consumer Federation of America. “It’s a sign the insurance market is facing some pretty big challenges.”
What is the FAIR Plan?
The FAIR Plan is the last-resort insurance for homeowners who can’t obtain coverage on the open market.
Usually, homeowners become stuck in this situation when private insurance companies deem their property too risky, such as those on the coast, in flood-prone areas, with structural issues, or in high-crime areas.
The FAIR Plan covers windstorms, hail, theft, vandalism, snow, fire, and smoke damage, up to $1 million, providing homeowners with coverage they otherwise wouldn’t have.
“If someone doesn’t have insurance coverage, and their home is destroyed, they’re often financially ruined, and they lose almost everything,” DeLong said.
What does the spike in enrollment mean?
DeLong says rising enrollment in the FAIR Plan indicates that more people cannot obtain homeowners’ insurance from private companies. “That’s not a good sign,” he said.
He pointed to climbing premiums driven by higher building and labor costs and more extreme weather fueled by climate change. Delong also argued insurance companies are “getting greedy, and they want to make major profits.”
Many insurance companies are not renewing homeowners, meaning insurers are reassessing properties — especially in storm-prone areas — and deciding they no longer want the risk. DeLong noted that insurers now use more technology to “slice and dice” consumers and assess individual risk.
According to the report, the state’s top 25 insurers and the FAIR Plan canceled more than 90,000 policies. Policyholders canceled about 60,000, and roughly 25,000 were due to nonpayment.
Still, DeLong said, “I think a lot of companies and analysts realize that climate change is a real problem. It’s not going to go away anytime soon.”
Christopher Stark, executive director of the Massachusetts Insurance Federation, believes the spike is a one-time anomaly.
“What we’re dealing with here is a confluence of factors, most of which I believe we’re on the other side of now,” he said.
Inflation in 2021 and 2022, along with several consecutive years of global industry losses over $100 billion, forced reinsurers and insurers “to look at their books, to adjust their risk portfolio,” he said.
Even though Massachusetts ranks high for nonrenewals, Stark said most homeowners still find coverage in the private market. “All insurers were rebalancing their books; some were able to take on more risk,” he said. “Some had to get rid of some of their risk.”
He noted that while the shift may have pushed some residents to the FAIR Plan, Massachusetts isn’t facing the crisis seen in states like Louisiana or California, where insurers pulled out due to severe weather and increased wildfires.
“Despite the challenges, we still have a very stable homeowners insurance market here in the commonwealth — but definitely not something that we’d like to see as a long-term trend,” Stark said.
What’s next?
Although total enrollment in the FAIR Plan increased in 2024, the Massachusetts home insurance market remains competitive, with nearly 70 insurance groups writing home insurance.
Stark said that while the FAIR Plan is the insurer of last resort in Massachusetts, homeowners can still buy coverage comparable to the open market — and its competitive pricing may be one reason enrollment is rising.
However, DeLong noted that the FAIR Plan is generally more expensive than buying from the private market.
“We’re not in a crisis,” Stark said. “We’re not close to crisis at this point.”
“We’ll be watching the market over this year and next to make sure we don’t have a trend on our hands,” he continued. “But still, we have lots of availability in the state, which makes for competition that keeps premiums in check as much as we can during these periods.”
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