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Many consumers never have to think of doing without insurance for their homes, cars, or businesses. Yet low- and moderate-income communities and communities of color tend to lack access to these essential coverages, according to consumer groups, governmental agencies, and community leaders. A recent landmark decision by the California Supreme Court--in a case where Consumers Union, publisher of Consumer Reports, and other parties intervened--may go a long way toward ending insurance redlining and ensuring equal access to basic insurance. An insurance company “redlines” when it refuses to write policies in particular geographical areas--typically minority, low-income, or inner-city areas--or when it varies the terms, conditions, or amount of coverage offered in those areas. Since 1994, California has had model regulations that require insurers to file annually certain data about where they are and are not writing homeowners, automobile, and commercial policies. These “community service statements” disclose the numbers of policies and premiums in each ZIP code in California, as well as new, canceled, and nonrenewed policies. The filings do not reveal individual policyholder information. (A leading insurer’s internal memoranda, according to a 2001 Wall Street Journal report, disclosed that when statutes were enacted in the 1960s to prohibit insurers from using race as a rating factor, that insurer began practicing neighborhood-based “area underwriting.”) When Consumers Union and several other groups requested copies of the filings of the nation’s largest insurers in 1999, the insurers sued, claiming that the data were their “trade secret.” The California Supreme Court ruled that California law requires these community service statements to be made public. When those data become available soon, CU will let our readers know and will obtain and analyze the data. Researchers and the public will be able to assess the levels of discrimination in underserved areas, and advocates will be able to work toward compliance with nondiscrimination laws. The disparities in policies and coverage can be huge. For example, all auto insurers in California must calculate premiums for three typical policyholders. One example is a young man, licensed two years, who drives 15 miles each way to school, purchasing little more than the mandatory minimum coverage and having one small accident with property damage. One of California’s largest insurers established an annual premium of $8,255 for this driver in inner-city Los Angeles (ZIP code 90062) and $2,336 in San Luis Obispo (93401), about 200 miles north. According to the 2000 Census, the 90062 population is 14.5 percent white with a median family income of $30,209; the other, 86.5 percent white, $61,230. Insurers cite high vehicle-theft rates in defense of denial of coverage or higher premiums in low-income areas. But California’s mandatory minimum coverage does not cover vehicle theft, so theft rates are irrelevant in that regard. In 1968, the report of the Kerner Commission, appointed by President Johnson in the wake of civil disorders, said, in part:
“Insurance is essential to revitalize our cities. … Without insurance, banks and other financial institutions will not--and
cannot--make loans. New housing cannot be constructed, and existing housing cannot be repaired. New businesses cannot be opened,
and existing businesses cannot expand, or even survive. … Communities without insurance are communities without hope.” But insurance companies can begin now to make those records public. They should provide equal access to insurance. Our cities,
and our nation, will benefit.
No dishpan hands
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