Inner City Press: Redlining Reporter (Insurers, Reinvestment, FOIA)

Click here for Current ICP Community Reinvestment Reporter

December 4, 2000 update: in October 2000, ICP was granted "party status" by the Missouri Department of Insurance, on Citigroup's Form A application to acquire one of the insurers owned by the scandal-plagued subprime lender, Associates First Capital Corporation. ICP was allowed to cross-examine Citigroup's witnesses, but was denied "reasonable discovery." Developing...

Updated re American General, and WorldCom-Sprint -- see Community Reinvestment Reporter, re MetLife:

Houston-based insurer American General was revealed last week as charging “race-based additive premiums” on industrial life insurance. According to Florida insurance commissioner Bill Nelson, “although many insurance companies stopped selling such policies years ago, some insurers who were charging different rates based on race did not reduce the higher premiums on existing policies when they eliminated such pricing on new policies.” Talk about a compliance culture (at Houston-based American General) -- “Honey, we forgot to eliminate the race-based premiums.” And this is a company that was granted a federal savings bank charter in 1999...

While difficulties persist in gaining fair access to insurance in communities of color, and while the U.S. Congress refused to address this issue in 1999, even while allowing banks and insurance companies to merge, here are two pieces of good news:

The Virginia Supreme Court agreed to a re-hearing on its decision of late 1999 that the non-profit organization HOME was not “injured” by the redlining practices of Nationwide Insurance. At the trial level, HOME had demonstrated that Nationwide used a zip code system that favored affluent, non-minority neighborhoods; the jury awarded $100 million in damages, and Nationwide immediately appealed. Three months ago, Nationwide got the Virginia Supreme Court to rule, 4-3, that HOME had not been directly injured, and thus did not have “standing” to bring the case. The Alliance of American Insurers’ Joyce Kraeger says, “We really don’t know what the court is thinking, and we’re really afraid of what the court might be thinking. If just one of the justices moves to the other side, it would be a starkly different result.” On April 24, 2000, Nationwide announced a $17.5 million settlement with HOME. The standing decision remains... vacated.

On March 2, 2000 the Texas Supreme Court declined to consider State Farm’s and other insurers’ appeal from a decision of the 3rd Texas Court of Appeals, that data reflecting auto insurance sales by zip code does not fall within the exemptions to Texas’ public information laws. The Austin-based Center for Economic Justice has been seeking this data, to assess redlining in that state. The decision, sadly, doesn’t mean that the zip code data will now be released -- the insurers continue to claim that the data is a “trade secret,” and there will be further hearings in June and December. Developing...

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WorldCom - Sprint updated May 22, 2000: Reports from Washington indicate that the Department of Justice and the FCC might, surprise, surprise, not approve WorldCom - Sprint (see ICP's protest, below). WorldCom's intentionally sabataged divisture when it was allowed to buy MCI seems to finally be being reviewed by these agencies. At the state level, hearing have been set in North Carolina, Texas, California, and Washington (New York has shown itself, again, to be one of the more "rubber stamp, no public hearing" states). You may wish to visit the following "Stop WorldCom-Sprint" site.... On February 4, ICP filed a timely protest to MCI WorldCom’s application to acquire Sprint, to the New York State Public Service Commission. ICP’s protest focuses on the anticompetitive effects the proposed merger would have on the long-distance and Internet backbone product markets. ICP has also urged the NYS PSC to consider how the companies and their merger affect the “digital divide.” A summary follows.

Internet backbone: With one-third of all Internet Service Provider connections, MCI WorldCom is far-and-away the largest provide of Internet backbone services in the United States. Sprint is second-largest, with a 10% market share. By one estimate, the combined companies would be as largest as the next eleven Internet backbone providers combined. See Backbone Market Share, Boardwatch Magazine’s Directory of ISPs (11th ed. 1999).

When Worldcom acquired MCI in 1998, Sprint, a Joint Petitioner here, urged the FCC to “require as a condition of the WorldCom/MCI merger, that the merging parties spin off either WorldCom’s or MCI’s Internet assets.” (Sprint’s Comments to FCC, March 13, 1998; see also Sprint’s press release of March 4, 1998).

On December 15, 1999, the FCC asked Worldcom for more information on how the proposed merger would affect the Internet backbone market, since (as here), Worldcom’s application included virtually no information on this issue. The NYS PSC’s required public interest review must include this issue, on which the current record is woefully inadequate. Worldcom’s CEO on January 12 said that “the wireless thing is not the only thing we wanted. It was a primary component. But, if we had to sell off the rest, the tax problem -- from any accounting perspective -- would be much more than we could live with.” Radio Comm. Report, Jan. 17, 2000. Observers have interpreted this as indicative of Worldcom’s position that it would refuse to make divestitures in this case. Id. In that event, the merger should be denied.

Long-Distance: MCI WorldCom is currently #2, and Sprint is #3, in the long-distance product market. The companies’ own application to the NYS PSC recites that Worldcom’s share of the national long distance market is 25.6%, and that Sprint’s share is 10.5%. Significantly, the New York market is even more highly concentrated than the “nationwide” market, with the top three players controlling over 84% of the market. Allowing two of these three players to combine would injure competition, and consumers. The petition should be denied on this ground -- as noted by one informed observer, “[r]educing the number of... players in long-distance cannot be cured by a[ny] divestiture of assets.” Telephony, December 20, 1999.

Digital Divide: As MCI WorldCom and Sprint have built-out their fiber optic networks, they have avoided communities of color -- ICP, along with other groups, raised this during the PSC’s and FCC’s review of the WorldCom - MCI merger in 1998. At that time, WorldCom represented to the FCC that “low-income and minority communities located in and around these city centers are well positioned to receive the benefits of local competition from MCI WorldCom. MCI and WorldCom are eager to expand their combined networks and provide service to residences and businesses at all socioeconomic levels.” (Second Joint Reply of WorldCom, Inc. and MCI Communications Corp., FCC Docket No. 97-211, at 93, filed March 20, 1998). It does not appear that these “benefits” have arrived, since the MCI WorldCom merger; ICP has asked the NYS PSC to allow it to take discovery on this issue, and to hold an evidentiary hearing.

The NYS PSC confirmed receipt of ICP’s protest on February 4. This will be updated as circumstances warrant.

Until then, for or with further information, contact us.

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The Virginia Supreme Court on Jan. 14, 2000, overturned the $100 million of punitive damages awarded against Nationwide Insurance in October, 1998, based on racial redlining in property insurance. The ruling stated that, “with due respect for HOME’s worthy mission of providing equal housing opportunities in the metropolitan Richmond area, we conclude nonetheless that HOME lacks standing to maintain its action against Nationwide.” This decision raises the question: how are cases of systematic discrimination in insurance to be prosecuted?

Telecom / "Electronic" Redlining: on October 5, MCI WorldCom announced a deal to buy Sprint for $115 billion, in the largest corporate merger to date. MCI WorldCom is number two in long distance telephone markets (by revenue), with a 26% market share. Sprint is number three, with an 11 percent market share. Together, they’d have 37% market share, just below AT&T, with 43%. Below these two are Qwest (2%) and Frontier (1.5%) and a few other companies with mere crumbs of the market. It would be a duopoly, clearly anticompetitive.

The deal would also combine the number one and two Internet backbone providers. Interestingly, in March 1998, Sprint opposed the WorldCom - MCI merger in filings to the FCC, claiming it would “short-circuit the growth of the global information network.” See also, Reuters newswire of January 5, 1998, "Groups Oppose WorldCom, MCI Deal," and Communications Today, May 7, 1998, "SBC, SNET Defend Merger to FCC." MCI WorldCom’s previously ordered spin-off of MCI’s Internet assets has not worked out -- for example, Cable & Wireless has sued MCI for violating the terms of the spin-off to C&W.

FCC Chairman William Kennard has already said that MCI WorldCom and Sprint “will bear a heavy burden to show how consumers would be better off.” But earlier this month, the FCC approved SBC - Ameritech, albeit with 30 conditions, including a requirement to provide high-speed data lines to low income areas. Republican FCC appointee Harold Furchtgott-Roth, in a dissent, called these conditions “overbroad and potentially unenforceable.” Commissioner Susan Ness was reportedly pushing for further commitments.

MCI WorldCom’s applications for regulatory approval will be filed, and the process will begin. This will be updated as circumstances warrant.

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In insurance redlining news, the House Commerce Committee on June 10, 1999 voted down, on party lines, a proposal to require property insurers to report their underwriting by census tract, as mortgage lending is currently reported. The proposal, sponsored by Rep. Tom Barrett (D-Wis.), was voted down 17-28. All Republicans on the Committee voted against it, joined by Democrats Dingell (D-MI) and Ralph Hall (D-TX). The Republicans’ and “soft” Democrats’ votes against these data-collection proposals appear more grounded in solicitude to the industry than in concerns about privacy. The American Banker of June 10, 1999, profiling freshman New York Senator Chuck Schumer, reports: “His support for the CRA is not boundless, however. Sen. Schumer called community activists’ plans to intensify CRA requirements ‘pie in the sky.’ He also opposes applying CRA to insurance and securities firms.”

Meanwhile, on June 9, Liberty Mutual Insurance Co. announced that it was settling discrimination complaints filed with the Department of Housing and Urban Development in 1997, by paying out $3.25 million in Washington, D.C., $4.25 million in Milwaukee and Richmond, and $3.25 million in Toledo. Liberty Mutual has agreed to provide replacement-cost insurance coverage to homes built before 1950. According to the Washington Post (6/10), the National Fair Housing Alliance will receive a $1 million grant from Liberty Mutual. “We don’t view it as a settlement,” Robert Muleski, a Liberty Mutual senior vice president, said. Then... what is it?

In Texas, Nationwide Insurance has avoided paying a $10 million fine for underwriting discrimination by agreeing to open twenty new offices in communities of color in Texas: eight in Houston, four in El Paso, three in Dallas, two in Austin and one each in Fort Worth, McAllen and Hidalgo County. Nationwide also committed to increase sales in 100 zip codes where the minority population is over 60 percent, and to bring its auto and homeowners insurance sales in those neighborhoods up to the same level as its statewide market share within five years. A Fort Worth state representative expressed disappointment: “In essence, what we’re seeing is that a company can break the law and then get coached into compliance by the people who should punish it.... The fact that there is no fine sends a bad signal to other players in this industry.”

As does New Jersey’s decision to suspend its program requiring auto insurers to increase their underwriting in urban areas. Winnie Comfort, spokeswoman of the NJ Department of Banking and Insurance, said the program is being discontinued because it has achieved its goals. She said insurers have written more than 80,000 new policies in the area areas and now “meet their market quotas.” Which is news to consumers in Newark, Trenton and elsewhere in the Garden State.

And speaking of redlining, Allstate this week announced it will seek to acquire the independent agent unit of CNA. But that’s for... next installment. Stay tuned...

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May 17, 1999

Inner City Press has finally received from the Office of Thrift Supervision that agency’s memoranda underlying its approval of Shelter Mutual Insurance Company’s thrift charter application in December 1998. ICP made a FOIA request for these memoranda months ago, and finally received redacted copies of the memos this week.

ICP had demonstrated a troubling pattern in Shelter Mutual’s underwriting: the virtual exclusion of zip codes that are predominantly African American, particularly in the St. Louis area. In a memo to OTS Deputy Director Richard Riccobono dated December 11, 1998, the OTS’ Business Transactions Division stated:

Certain of the commenter’s comments related to matters reflecting on the managerial resources (including character and responsibility) of the Parent Holding Company’s management. Specifically, the commenter alleged that the Parent Holding Company has engaged in insurance practices discriminatory toward minorities, by virtue of having a far greater market share presence statewide than in low-income and African-American areas of Missouri.

With respect to the allegations regarding the amount of business in low- and moderate-income areas, Compliance Policy... requested and received from the Applicants an analysis of 1998 property insurance policies and agents by county and zip code. Compliance Policy has concluded that... while some disparities remain, Compliance Policy’s conditions... are intended to address Compliance Policy’s remaining concerns regarding the distribution of Applicant’s business... Compliance Policy has stated that the area nevertheless deserves continued monitoring...

What should be noted here is that the OTS acknowledges that “disparities remain,” but believes that requiring Shelter Mutual to collect and report (only to the OTS) data about its lending is the only condition necessary in order to approve Shelter Mutual’s application. The OTS Director of Compliance Policy’s December 11, 1999, memo is more detailed:

...two minority ZIP codes, with median incomes of approximately $11,000, have no home insurance policies... While some disparities remain, as noted by ICP, the disparities appear to have decreased significantly since the 1993 study by the Missouri Department of Insurance. We believe this issue merits continued monitoring... However, it does not merit denial of this application. The insurance industry in general has had to modify some of its policies and procedures, to address redlining concerns, and Shelter Group appears to have moved appropriately with the industry.

ICP question: does this mean that the OTS’ position is that, as long as an insurance company applicant for a thrift charter is not significantly worse, or more disparate, in its underwriting than the rest of the insurance industry, no denial of the insurer’s application is merited?

Particularly striking in the documents provided to ICP by the OTS was a November 23, 1998, memo from the Director of the OTS’ Midwest Region in Dallas. While OTS-DC at least acknowledge that “disparities remain, as noted by ICP,” the Regional Director’s memo takes the legalistic (and pro-Applicant) position that “we do not believe that the protest.... has been adequately supported.” OTS-DC found that the protest was supported (with reams of data), but believed that by imposing conditions, the issues would be addressed and approval could be granted. The OTS Regional Office, however, claimed that the protest had not been “adequately supported.” Beyond 1998 underwriting by zip code, how COULD a comment opposing an insurer’s thrift charter application be supported? The OTS should move to address the contradiction between the standards of proof used by its DC headquarters and its Regional Offices, which might play itself out in the current consideration of Conseco’s and Green Tree’s application for a thrift charter. Developing...

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May 10, 1999 -- The Senate Judiciary antitrust subcommittee, doing the bidding of the ever-larger telecom conglomerates, on May 6 unanimously approved a bill imposing time limits on the Federal Communications Commission’s review of mergers, and of public comments on mergers. Increasingly, comments on telecom mergers raise issues of electronic redlining; click here for more, on ICP's FCC / Telecom Page. Subcommittee chairman Mike Dewine, Republican of Ohio, said “the FCC is taking too long to review mergers. [Businesses] need certainty so that they can carry out their long-term strategies.” What Sen. Dewine apparently meant is that the FCC is taking too long to APPROVE mergers. The “certainty” that the monopolizing applicants want is for approval; and that is the message that the Senate is sending to the FCC.

The irony is that the FCC usually waits for the Department of Justice to act, and thereby can use the information collected and developed by the DOJ. If the FCC must act faster, it will have to do its own detailed inquiry into the competitive effects of mergers, possibly creating more burdens on applicants. The FCC is required to consider more than antitrust -- it must rule on a broader “public interest” standard. While the FCC has approved virtually all mergers, it appears that the Republicans are moving toward stripping the FCC of its “public interest” jurisdiction. Public interest be damned -- “businesses need certainty.” The bill now passed to the full Senate Judiciary Committee, and then to the Senate floor. If the Senate Republicans actions on S. 900, the financial modernization bill that rolls back the Community Reinvestment Act, is any guide, this pro-monopoly bill will glide through the Senate, with the Democrats capitulating as well. Ma Bell, fuse once against with your children, without any restrictions on pricing. Developing...

April 26, 1999

Insurance (Auto): Disparities in pricing in auto insurance continue. A recent study conducted by the National Association of Insurance Commissioners reveals that New York State trail only New Jersey in average auto insurance premiums. New Yorkers paid an average of $952.89 for auto insurance in 1997, $247 more than the national average. In the Bronx, full (liability, theft, vandalism and collision) coverage for a 20 year old varies from $3,759 to $8,591, depending on the insurer. Democrats in the NYS Assembly are using this figures to press for legislation creating an independent insurance review office, and requiring the NYS Insurance Department to post individual companies’ premiums on the NYSID web site, to promote comparison shopping. To be updated.

Homeowners Insurance: in Memphis, Tennessee, State Farm earlier this year raised homeowners insurance premiums for residents of Hickory Hill, just as this community was annexed to Memphis, giving it better fire protection. According to the Memphis Commercial Appeal, this is because Hickory Hill was annexed to the higher-priced of the two districts into which State Farm divides Memphis. “Homeowners in one zone pay a $551 annual premium to insure a frame house, with $100,000 of liability coverage and a $500 deductible. Those in the other zone pay just $463... the Department [of Commerce and Insurance] last September approved a 25 percent rate increase for State Farm clients in five Memphis area zip codes, including one in Hickory Hill.” As the Commercial Appeal concludes, “more questions need to be asked. The fact that the tip of the insurance rating iceberg has been scratched at all could serve a useful public purpose.” ICP has submitted an open records request to the Tennessee Department of Commerce and Insurance; updates forthcoming in this space.

Meanwhile, on the investment side, California insurers, faced with Assembly Bill 869, which would push them to make investments in specified urban redevelopment projects, make much of the launch of the (voluntary) program, Impact Community Capital. A week before an Assembly hearing on AB 869, Impact Capital announced its first transaction, buying first mortgage loans on multi-family properties and re-selling them as bonds to insurance companies. State Farm lawyer Martin Erwin calls Impact Capital “an aggressive voluntary effort, spearheaded by the insurance industry, [that] will better serve California’s communities than a state-mandated system contemplated by AB 869.” Impact Capital’s President Dan Sheehy denied that the introduction of Impact Capital was intended to “head off implementation of that legislation. This timing is coincidental in that regard. It just so happens we’re at the stage where we’re poised to complete our first transaction.”

A week later, the California insurers’ trade associations issued a press release opposing AB 869, stating that “insurers already voluntarily participate in two other investment vehicles -- IMPACT Community Capital, LLC and California Organized Investment Network (COIN)” and that AB 869 “potentially treats insurers like banks that must abide by rules under the federal Community Reinvestment Act (CRA).” Developing...

On the Fair Housing Act front, HUD on April 14 wrote to the U.S. Conference of Mayors, confirming that HUD is withdrawing its proposed rule that would have clarified to cities and other Community Development Block Grant (CDBG) recipients that they cannot receive federal housing funds if they are failing to “affirmatively further” fair housing choice in their communities. How this is consistent with the Administration’s (and HUD Secretary Cuomo’s) pronouncements on the importance of combating discrimination, particularly in housing and lending, is unclear. These questions are now being posed to HUD; this story will be updated in this space.

Rep. (and Senate hopeful) McCollum, R-FL, continues his attacks not only on the Community Reinvestment Act, but also on the Fair Housing Act. His 1999 version, H.R. 190, would do away with the Department of Justice’s pattern and practice jurisdiction, and eliminate the disparate impact theory from private litigation. McCollum tried to append it to H.R. 10 but withdrew it; it has now been separately referred to the House Judiciary Committee’s Constitution Subcommittee. Polls don’t bear well for McCollum’s dreams of Connie Mack’s Senate seat, where he could join forces with Gramm, Shelby, et al. in attacking the Community Reinvestment Act.

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April 19, 1999

The politics of redlining continue to fascinate. While Republicans on the Senate Banking Committee, notably Texan Gramm and Alabaman Shelby, attack the Community Reinvestment Act as extortion, Republicans on the Senate Commerce Committee, led by John McCain of Arizona and Conrad Burns of Montana, assert that telecommunications companies are redlining rural and low-income areas. Click here to see report on ICP’s Telecom Page.

The apparent difference? There are Internet service providers (large campaign contributors) who want legislation forcing the dominant providers to have to allow them access to their wires, which might be gained by beating the redlining drum. In banking and insurance, fewer campaign contributions come for asserting or legislating against redlining. Still, Republicans might want to make their messages more consistent...

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April 7, 1999

A controversy that has arisen about the New York State Insurance Department’s withholding of records casts an interesting light on arguments that insurance can only be regulated by the states -- an argument some use to oppose Home Mortgage Disclosure Act-like requirements for property insurance.

A federal law passed in 1994, the Violent Crime Control and Enforcement Act, has insurance fraud provisions which require any person convicted of a federal felony to seek the consent of state insurance regulators to work in the field of insurance. While this may not be federal regulation of insurance, it IS a federal law which requires insurers, their employees, and state regulators to do certain things. A HMDA-like law for insurance could be enacted on this basis...

The controversy in New York is that the NYSID is refusing to release the identity of a felon it agreed to allow to continue to work for Met Life. National Underwriter has been seeking the release of this information, but the NYSID has continued to redact (that is, to black-out) the name of the felon, and of the other Met Life officers who supported his application. NU has editorialized against the NYSID, but it looks like litigation is NU’s only remaining avenue. The secrecy of the NYSID has become a matter of concern not only to community groups, but to the trade press as well. Developing...

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March 15, 1999

On Friday, March 12, after three years of delay, the California Department of Insurance finally released some of the data on “underserved communities” that the California legislature declared public four years ago. The Department’s report provided 1995 statewide data, for 151 ZIP codes (each "two-third minority, with low husehold incomes"), and revealed that:

--While sixteen percent of California’s population lives in these 151 ZIP codes, only six percent of homeowners insurance policies where written in these ZIP codes;

--Homeowners in these communities were three times as likely to have “fire-only” policies rather than full homeowners policies that include protections against theft and injury lawsuits;

--Only six percent of auto liability polices were written in the target ZIP codes, despite the fact that 13 percent of vehicles are there;

--Only five percent of mail solicitations went to these communities; and

--Only four percent of insurance agents are located in these communities.

Among the companies with the most disparate records were State Farm, CNA, and, to a slightly lesser degree, Prudential.

These data are not only troubling, but provide increase support for the extension of laws like the Community Reinvestment Act and the Home Mortgage Disclosure Act to the insurance industry, as part of financial modernization legislation.

The California Department of Insurance has indicated it will release the (delayed) 1996, 1997 and 1998 data by the end of the year. Will be updated in this space.

As an update to the stories below, note that the Office of Thrift Supervision has withheld from Inner City Press all of the policy-by-zip code data it has for State Farm -- despite the fact that ICP DID obtain such information for Shelter Mutual, another applicant for an OTS thrift charter. ICP is appealing; update forthcoming.

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Redlining refers to a process by which companies refuse to do business, or to do so fairly, in particular neighborhoods, most often (but not only) communities of color. The term originated from a practice in the insurance industry, of drawing a red line on a map, around the neighborhood to be excluded or treated differently.

Whereas banks are subject to the Community Reinvestment Act, and mortgage lenders are required to report where they make their loans under the Home Mortgage Disclosure Act, insurance companies are not subject to any similar federal law -- in fact, insurers are regulated only by the states.

While some states have laws on their books requiring the collection, and, with varying degrees of delay, release of insurance policy data by zip code, recent inquiries by Inner City Press and the Inner City Public Interest Law Center have found that these laws are generally moribund and unenforced.

ICP has made requests, under state Freedom of Information laws, to more than a dozen states, for policy by zip code data. Here are some responses:

Mississippi: Pleas M. Norris, Senior Attorney to Insurance Commissioner George Dale, writes that “the material that you requested is not required by our law to be filed by an insurance company.”

Nebraska: The Department’s Market Conduct Examination Supervisor writes that the only information available is “several years old.”

Missouri: The Department’s Assistant Chief Examiner writes that “the Department is unable to publicly release the company specific data,” and refers to a pending court case, stating that “settlement negotiations are underway.” (More on this next time).

Illinois: “This letter is to inform you of the Department’s determination to deny your request... under the authority of an administrative order issued by the Director on July 24, 1996, the DOI [Department of Insurance] is not required to generate reports for the public upon request if they are not otherwise available.”

Kansas: General Counsel Margaret Gatewood writes: “Please be advised that this information is not maintained by the Kansas Insurance Department, and therefore, we cannot provide the same to you.”

Iowa: Assistant Attorney General Scott Galenbeck neither grants nor denies ICP’s request. Rather, he states that the records can only be viewed in person, at 330 Maple Street, Des Moines, Iowa. You just may see us there -- we love that kind of invitation.

Long story short, there is in most states no meaningful reporting of insurance underwriting data by geography. ICP has filed a number of appeals under the state Freedom of Information laws, and may begin some FOIA litigation -- but at the present time, this data is simply not available, except in the rare cases where it can be obtained in administrative proceedings. Click here to view ICP’s analysis of data it obtained about the underwriting of Shelter Mutual, an insurer based in Columbia, Missouri -- not from the Missouri Insurance Department, but rather from the Office of Thrift Supervision (which then did not take appropriate action on the data).

Meanwhile, in a piecemeal fashion, evidence of insurance redlining continues to mount. Consider:

In October, 1998, a jury in Richmond, Virginia, slapped Nationwide Insurance with $100 million in punitive damages, based on a showing that Nationwide discriminated against predominantly African-American Richmond neighborhoods in the marketing of homeowners insurance. The plaintiff was Housing Opportunities Made Equal, represented by now-Mayor of Richmond, Timothy Kaine. Nationwide is now disputing whether Mayor Kaine can receive both attorneys fees and the contingency fee he negotiated.

The Texas Insurance Department has released data showing a disproportionate lack of availability of auto insurance in minority communities, and a Fort Worth state lawmaker has called for an investigation of nine companies for discrimination.

The South Carolina consumer advocate’s office has brought into question that state’s Insurance Department’s permission for companies to use zip codes as a basis for setting insurance premiums.

In California, an Alameda County Superior Court judge has ruled that Insurance Commissioner Chuck Quackenbush has illegally allowed insurers to base auto premiums on zip codes, in violation of that state’s Proposition 103.

In Louisiana, 56 plaintiffs have filed a class action lawsuit accusing insurance companies of charging minority drivers “excessively” for their insurance simply because they live “within certain designated zip codes.”

And, in February 1999, the Toledo Fair Housing Center filed suit against Farmers Insurance Group for redlining in insurance sales in African American neighborhoods of Toledo.

Perhaps it is better in some states -- Farmers Insurance Group, in defending its underwriting approach, has pointed to a pilot program it established in California, called Farmers Action for Communities of Tomorrow (“FACT”).

But that’s just what we seek - the FACTS. State insurance regulators, even in states where the zip code data is supposed to be available, routinely do not provide it. Massachusetts is one state that has begun to provide such data, and, in late January 1999, the Massachusetts Affordable Housing Alliance reported that, based on this data, insurers have made “progress... compared to four years ago.” Boston Herald, January 27, 1999, Page 35. In the field of mortgage lending, public release of this information (under the Home Mortgage Disclosure Act) has resulted in at least some improved lending performance (much of it under the Community Reinvestment Act). How long will it be for insurance?

A separate issue involves insurance companies decisions about where to invest the billions of dollars in insurance premiums they collect, much of it from low and moderate income neighborhoods, and communities of color. Here, too, there is a need for disclosure. And it is becoming apparent that such disclosure can and will only happen if the insurance industry is made subject to federal, rather than state, regulation. In New York State, a law exists, requiring insurers to disclose annually “[a] statement setting forth a description of the investments, activities or other contributions of the company relating to New York state, its residents, municipalities, businesses and institutions...”. The reports made available to date under this law have been virtually meaningless. More on this next time...

For now, this has been Inner City Press’ Redlining Reporter. For or with more information, please contact us.

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