State Farm Accused of Redlining in L.A. : Insurance: Company denies discriminatory practices. Garamendi concedes lack of evidence.
Insurance Commissioner John Garamendi Thursday accused State Farm Mutual Automobile Insurance Co., California’s largest homeowners insurer, of redlining, or illegal sales discrimination, in inner-city neighborhoods of Los Angeles.
Based on a new study of 1992 homeowners insurance sales in selected ZIP codes, Garamendi said the company “writes virtually no policies in South-Central and East Los Angeles” because it refuses to compete in poorer neighborhoods.
State Farm denied redlining, saying it has a sales agent within 3 1/2 miles of every home in Los Angeles and paid out more money in claims from the city’s 1992 riots than all but one competitor.
“We have heard these charges repeatedly but never had a complaint filed against us,” State Farm spokesman Bill Sirola said Thursday. “It starts to get frustrating.”
Garamendi acknowledged in an interview that he lacks the evidence to make a formal redlining charge stick against State Farm, but “we are building the case, map by map and line by line.”
The accusation came in Garamendi’s testimony in San Francisco Thursday at a public hearing on property insurance discrimination held by the U.S. Department of Housing and Urban Development.
Garamendi has previously accused State Farm and other carriers of auto insurance redlining, a charge the companies also deny.
Thursday’s report was based on preliminary information from an ongoing Insurance Department study of insurance sales in California’s 10 largest cities.
The preliminary study showed that No. 2 Allstate Insurance Co. was doing business throughout Los Angeles and had actually exceeded its statewide market share average in the inner city, for which Garamendi praised the company.
He criticized Farmers Insurance Group, the third-largest insurer, for selling more of its limited fire insurance policies than its full-fledged homeowners policies in inner-city neighborhoods.
“Farmers has clearly not ignored underserved areas,” said Jeffrey Beyer, a company vice president. He said customers in lower-income neighborhoods were buying the more limited policies because they are cheaper.
