Sacramento– An unprecedented state survey released Friday suggests that insurance redlining exists in California’s low-income and minority neighborhoods, where fewer people obtain coverage and there are fewer agents to serve them.
The survey by the Department of Insurance – the first to examine automobile, homeowners and commercial coverage in “underserved communities” – showed that roughly 16 percent of the state’s population lives in those neighborhoods. However, those areas accounted for only 6 percent of the private passenger auto insurance, about 6.6 percent of homeowners coverage and less than 10 percent of all commercial policies.
Moreover, only about 5 percent of the companies’ agents serve the mostly inner-city areas.
The report also noted that only 5.9 percent of mail solicitations went to underserved communities.
“This is the first time a report like this has ever been released in the nation. Without a doubt, we finally have a tool that the consumer groups wanted and that we are committed to using to … be looking at the information and answering the hard questions,” said Deputy Insurance Commissioner Rex Frazier.
The study identified 151 ZIP Codes where the neighborhoods met the criteria of “underserved” – the population’s income averages half or less of the state median, the number of uninsured drivers is at least 10 percent above the state average and there is a large population of minority groups.
The survey covered 1995 data. The 1996 figures will be released in mid-April and the 1997 data will be released by June 30, Frazier said.
Critics of the department said the commissioner has the authority to attack redlining but has failed to do so, and questioned whether asking insurers to voluntarily focus on underserved communities was worthwhile.
“Redlining” means unfairly discriminating against people because they live in high-risk areas, or for other reasons.
“What this survey proves is that insurance companies are redlining in certain communities,” said Gina Calabrese, an attorney for the Santa Monica-based Proposition 103 Enforcement Project. “The commissioner has the authority to diminish redlining if he were following Proposition 103,” Calabrese said, referring to a 1988 insurance-reform ballot initiative.
“It’s showing that in 1995, it was four times as difficult to get insurance if you lived in a low-income area than the statewide average,” said Robert Gnaizda of the San Francisco-based Greenlining Institute, a nonprofit advocacy group.
“Redlining is as bad now (in insurance) as it was in banking 20 years ago,” Gnaizda added.
Another group that sued the Insurance Department over redlining issues, Public Advocates of San Francisco, said that only three of 66 auto insurers served uninsured communities at the same level of the rest of the state.
Insurers said there are proportionately fewer policies – and agents – in low-income areas because insurance, not surprisingly, is harder to sell than in other areas.
“The fact of the matter is, agents have the ability to write insurance anywhere in the state, so this study may not directly reflect the fact that there are agents in surrounding ZIP Codes,” said State Farm spokesman Bill Sirola.
“The study shows that in the 151 ZIP Codes there are 2,200 agents. That may not appease some, but I would point out that this is a strong indicator that those areas do have agents,” Sirola added.