Texas Launches FAIR Plan For Home Coverage

"We know the need is there. We have had quite a few inquiries from people who are trying to buy or sell houses and find it difficult to find insurers that will provide necessary coverage for the houses," Mr. Jones said.

He emphasized, though, that the purpose of launching the residual market is not to compete with insurers operating in his state.

"One of the points we are trying to make is that there is no intention to compete against insurance companies that are looking for business in the voluntary market. People can access this only through agents, and the coverage provided is minimal. This is probably less than what most consumers want, but it will get the job done," Mr. Jones explained.

Access to the FAIR Plan, Mr. Jones said, is available only to consumers who have been rejected for coverage by at least two licensed insurers, and only if they haven't received an offer of comparable insurance from other insurers licensed in Texas.

Furthermore, the consumer's house is subject to inspection by the FAIR Plan to ensure that it meets the plan's standards for insurability.

Mr. Jones also told National Underwriter that this is not meant to be a "permanent home" for policyholders. "There is a requirement that if you buy from FAIR, you have to be qualified every two years," he said.

These policies will be issued for a term of one year, but policyholders would need to reapply for residential property insurance in the voluntary market every two years and be rejected again for coverage to requalify for this market-of-last-resort.

Currently, the FAIR Plan Association has authorized some 450 general lines property-casualty insurance agencies to sell these policies to Texas consumers. But ultimately, it intends to authorize all general lines property-casualty agents who show an interest, according to the Texas insurance department.