Critical Evaluation of Fair Plans

Abstract

Widespread problems of availability of basic property insurance became a matter of public concern over the last decade, culminating in the emergence of a Congressional interest following riots in inner-city areas. The Congress, in 1968, authorized a Federal program following generally the recommendations of the President's Advisory Panel on Insurance in Riot-Affected Areas, encompassing Federal reinsurance against riot and civil disorder losses and State-wide FAIR Plans to assure access to insurance markets. FAIR Plans, in operation for over a year, appear generally to have succeeded in accomplishing the basic purposes for which they were organized, although the profitability or loss potential of these Plans is as yet undemonstrated. New or more comprehensive Federal regulations governing the operation of approved FAIR Plans were issued in September 1970. A comprehensive report on the availability of crime insurance in urban areas was transmitted to Congress by the Federal Insurance Administration in July 1970 recommending a sequential approach to a solution of the availability problem with maximum reliance upon the capabilities of private industry and the existing structure of State regulation. The viewpoint aid position of the Federal Government rely upon the insurance industry and the States to continue to carry out their responsibilities under the free enterprise system. To the extent the industry and the States fails to do so, the Federal Government recognizes its responsibility to meet the essential insurance needs of the public. In evaluating the role of the FAIR Plans in meeting urban insurance needs, it is necessary both to understand the background and purpose of the legislation that authorized the Federal riot reinsurance program, and to appreciate the growing public need and demand for insurance