Insurers Write Far Fewer Policies in Minority Areas, State Says
Insurance data released Friday by state regulators show what consumer advocates have long contended: that insurance companies write far fewer auto, homeowners and small-business policies in low-income, predominantly minority areas.
The California Department of Insurance found that in 1995, the first and only year studied, the average insurer wrote less than 6% of its auto policies, less than 7% of its homeowners policies and less than 10% of its small-business policies in low-income and minority areas that house more than 16% of the state’s population.
The insurance industry denounced the data as out of date, saying increased competition, especially in the auto insurance market, has led to lower prices and greater availability of insurance in low-income areas. The Insurance Department said auto rates have dropped 11.3% since 1995.
Candysse Miller, executive director of the Western Insurance Information Service, pointed to insurance denial rates for auto and homeowners insurance that were exactly the same--5%--in the underserved areas as statewide. She said the rates suggest that most who apply for insurance get it.
Consumer advocates, however, said the department’s data understated the poor’s lack of access to insurance, pointing to study figures showing that the low-income areas are served by only 4% ot 5% of the state’s insurance agents.
“Even those companies that are better than average are writing about half the policies in underserved areas that they’re writing in the rest of California,” said Mark Savage, managing attorney for San Francisco-based Public Advocates.
The study examined 151 ZIP Codes whose residents were predominantly minorities with incomes below the median for the state. In addition, the areas had an uninsured-motorist rate that was 10 percentage points above the statewide average.
The study showed that 13% of the state’s registered vehicles were found in the underserved areas, while only 5.6% of the auto liability policies and 5.1% of the auto physical damage policies were written there.
The study is sure to fuel debate over low-cost insurance policies, which advocates say are needed to reduce the uninsured-motorist rate in low-income areas. Sen. Martha Escutia (D-Whittier) has introduced a $300-a-year liability-only policy, while insurance industry lobbyists advocate a stripped-down policy with lower liability limits and no mandated price.
Bob Gnaizda, head of the San Francisco-based Greenlining Institute, called for regulations similar to banking lending laws that would require insurance companies to do business in low-income areas.
