2.3 Kansas FAIR Plan

Overview

The Kansas All-Industry Placement Facility, commonly known as the Kansas FAIR Plan (Fair Access to Insurance Requirements), is a not-for-profit insurance association created by Kansas law to provide basic property insurance for responsible applicants who cannot obtain coverage through the voluntary insurance market.

Purpose and Authority

Legislative Authority

• Established under Kansas Statutes Chapter 40
• Administered by Kansas Insurance Department
• Operated by member insurance companies
• Serves as market of last resort

Mission

The Kansas FAIR Plan exists to:

• Provide basic property insurance to eligible applicants
• Ensure insurance availability throughout Kansas
• Protect property owners from going uninsured
• Stabilize insurance markets in high-risk areas

Eligibility Requirements

Primary Requirement: Market Rejection

To qualify for the Kansas FAIR Plan, applicants must demonstrate they have been unable to obtain insurance through the standard market:

Property Inspection

• Required before coverage approval
• Evaluates property condition and risk factors
• May identify required repairs or improvements
• Approval not guaranteed

Reasons for Standard Market Declination

Common reasons Kansas property owners may be declined in the voluntary market:

1. Location - Tornado-prone or high-risk areas
2. Claims History - Previous multiple claims
3. Property Condition - Age, maintenance issues
4. Construction Type - Non-standard building materials
5. Vacant Property - Extended vacancy
6. Unique Risks - Unusual exposures

Coverage Available

Types of Policies Offered

Covered Perils (Depending on Policy)

• Fire and lightning
• Windstorm and hail
• Explosion
• Smoke damage
• Vehicles and aircraft
• Vandalism and malicious mischief

Coverage Limitations

• Basic coverage only - Not as comprehensive as standard HO-3
• Named perils basis - Only listed perils covered
• May have coverage gaps compared to voluntary market policies
• Higher premiums than standard market

Important Policy Features

Valuation

• Generally written on Actual Cash Value (ACV) basis
• Depreciation applied to claim payments
• Replacement cost endorsements may be available

Deductibles

• Standard deductibles apply
• Percentage deductibles may apply for wind/hail
• Higher deductibles may reduce premiums

Premium Rates

• Rates reflect higher risk profile
• Generally higher than voluntary market
• Subject to Kansas Insurance Department approval

Funding and Operation

Member Company Participation

• All admitted Kansas property insurers must participate
• Participation is mandatory, not voluntary
• Market share determines contribution percentage
• Based on each company's written premium in Kansas

Administration

• Governed by board of directors
• Member insurers share in losses and expenses
• Reinsurance may be purchased
• Subject to Kansas Insurance Department oversight

Application Process

Steps to Apply

1. Contact Licensed Agent

   • Must apply through licensed Kansas agent
   • Agent submits application on behalf of applicant
   • Cannot apply directly to FAIR Plan

2. Gather Documentation

   • Written declinations from voluntary market
   • Property information and photos
   • Completed FAIR Plan application

3. Property Inspection

   • FAIR Plan arranges inspection
   • Identifies any required improvements
   • Determines insurability

4. Underwriting Review

   • Application reviewed for eligibility
   • Coverage and terms determined
   • Premium calculated

5. Policy Issuance

   • Coverage bound upon approval
   • Policy documents issued
   • Premium payment required

Exam Tip: Remember that the Kansas FAIR Plan requires applicants to first be declined by at least three voluntary market insurers. This is the "market of last resort" - not an alternative to standard insurance.

Worked FAIR Plan Eligibility and Coverage Walkthrough

The Kansas FAIR Plan (Fair Access to Insurance Requirements) is the state's residual market for basic property insurance, created so that owners of insurable but hard-to-place property are not left bare. Eligibility hinges on a genuine inability to obtain coverage in the voluntary market: an applicant must show that standard insurers have declined the risk, typically evidenced by one or more recent declinations, before the FAIR Plan will write the risk. The plan exists to insure property that is sound but located or constructed in a way the standard market avoids, not to undercut available voluntary coverage.

Coverage Scope and Limits

FAIR Plan policies provide basic named-peril property coverage, centered on fire and the extended-coverage perils (windstorm, hail, explosion, riot, aircraft, vehicles, smoke) and vandalism, rather than the broad open-peril protection of an HO-3. Coverage is written subject to maximum dollar limits set by the plan, and settlement is frequently on an actual-cash-value basis, meaning depreciation is deducted.

Candidates should expect a question contrasting the narrower FAIR Plan coverage with a standard homeowners form and should know that the FAIR Plan is property-only; it is not a substitute for the liability and theft breadth of a full HO program.

How the Plan Is Funded and Governed

The FAIR Plan is not a state agency that spends tax dollars. It is an association of all insurers licensed to write property insurance in Kansas, and every member shares in the plan's premiums, losses, and expenses in proportion to its share of the state's voluntary property market. This shared-pool design means a profitable year reduces, and a catastrophic year increases, each member's assessment. The plan is administered under the supervision of the Commissioner of Insurance, who approves its plan of operation and rates.

Inspection, Application, and Exam Framing

An applicant ordinarily applies through a licensed producer, and the plan may require a property inspection to assess condition and insurability; the plan can decline truly uninsurable property (for example, a structure with serious unrepaired hazards) but cannot decline solely because the standard market found the risk unattractive. On the exam, the FAIR Plan is the correct answer whenever a scenario describes a property the voluntary market refuses to insure, the owner needs at least basic fire and extended coverage, and the question asks where coverage of last resort can be obtained.

Remember the sequence: voluntary declination first, then FAIR Plan basic coverage, often at ACV and within capped limits.