A Surge in Massachusetts FAIR Plan Enrollments

Executive Summary

After years of decline, Massachusetts’ FAIR Plan, the insurer of last resort, has experienced a notable increase in policy enrollments, reaching over 173,000 policies in fiscal year 2024.

This upward shift signals growing challenges within the state’s homeowners’ insurance market, driven primarily by climate change impacts, escalating construction and labor costs, and heightened premiums. While some industry leaders view this surge as a temporary disruption, it underscores significant risk management and underwriting considerations for insurers, agents, and underwriters operating in Massachusetts.

For insurance professionals, this trend highlights the evolving risk landscape where traditional underwriting models are being tested by environmental volatility and market economics. The increased reliance on the FAIR Plan suggests that more homeowners are being deemed high risk or are priced out of the private market, creating both challenges and opportunities in portfolio management, risk assessment, and customer retention. Understanding the drivers behind this shift is essential for maintaining competitive positioning and ensuring long-term market stability.

Key Insights

• Climate Change as a Persistent Risk Driver
  Massachusetts is confronting the tangible effects of climate change, with more frequent and severe weather events such as windstorms and flooding. These perils are prompting insurers to reassess property risk profiles more aggressively, often leading to nonrenewals or higher premiums. Insurance professionals must integrate advanced climate risk analytics into underwriting processes to better predict and price these emerging exposures.
• Rising Construction and Labor Costs Impact Premiums
  Inflationary pressures on building materials and labor translate directly into higher replacement costs for insurers, which in turn drive up homeowners’ premiums. This cost inflation contributes to affordability challenges for policyholders and increases the likelihood that some will resort to the FAIR Plan for coverage.
• Increased Use of Technology in Risk Segmentation
  Insurers are leveraging more sophisticated data and technology tools to “slice and dice” risk at a granular level, allowing for more precise underwriting but also resulting in more consumers being classified as uninsurable or too costly to retain. This trend emphasizes the importance of balancing technological insights with market accessibility to avoid pushing too many customers into the last-resort market.
• Policy Cancellations and Nonrenewals Are Significant
  According to the report, insurers canceled over 90,000 policies, with an additional 60,000 voluntarily canceled by policyholders and 25,000 lapsing due to nonpayment. These figures reflect market volatility and underline the need for proactive risk communication and retention strategies by insurers and agents.
• Market Stability Despite FAIR Plan Growth
  Despite increased FAIR Plan enrollments, Massachusetts’ homeowners insurance market remains competitive, with nearly 70 insurance groups actively writing policies. This competitive environment helps moderate premium growth and offers alternatives to FAIR Plan coverage, though vigilance is required to prevent long-term market imbalance.

Insurance Industry Applications

• Underwriting Strategy Refinement: Insurers and underwriters should incorporate climate resilience data and predictive modeling tools to refine risk assessments, particularly for coastal and flood-prone properties. This approach can improve portfolio risk quality and reduce reliance on the FAIR Plan as a backstop.
• Product Innovation and Affordability Measures: To counteract premium inflation and retain customers, insurers might explore innovative product designs such as tiered coverage options, usage-based policies, or enhanced mitigation credits for homeowners investing in risk reduction measures.
• Agent Education and Customer Engagement: Agents play a critical role in educating homeowners about coverage options, FAIR Plan implications, and risk mitigation strategies. Enhanced training and communication can help identify at-risk policyholders early and guide them toward sustainable insurance solutions.
• Risk Mitigation Partnerships: Collaborating with local governments and community organizations to promote resilient building practices and disaster preparedness can reduce overall claims frequency and severity, benefiting insurers and policyholders alike.
• Monitoring Market Trends: Insurers and industry groups should closely monitor FAIR Plan enrollment trends and policy cancellation rates as early indicators of market stress, enabling timely adjustments in underwriting guidelines and capital allocation.

Conclusion and Recommendations

The recent increase in Massachusetts FAIR Plan enrollments serves as a cautionary signal for the insurance industry, reflecting the complex interplay of climate risks, economic factors, and evolving underwriting practices. While the market remains competitive and stable for now, insurers must proactively adapt to these pressures through enhanced risk analytics, product innovation, and customer engagement.

For insurance professionals, the imperative is clear: develop strategies that balance risk selection with market accessibility, invest in data-driven underwriting, and foster resilience both within insured properties and the broader community. By doing so, stakeholders can help mitigate the growth of last-resort insurance dependency and maintain a healthy, sustainable homeowners insurance market.

Original Source: https://www.boston.com/news/real-estate/2026/01/09/more-people-in-mass-are-enrolling-in-the-insurance-of-last-resort-why/