Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

CU Pushes for Disclosure of Insurance Redlining Data in CA

Tuesday, February 10, 2004
Mark Savage or Michael McCauley
Jenny Huang

Data Could Expose Discrimination, But Insurers Claim It’s a Trade Secret

SACRAMENTO, CA — The California Supreme Court will soon consider whether the state must make public the data it has collected from insurance companies to determine whether they engage in redlining by discriminating against consumers based on their race, income, or the zip code where they live. At issue in State Farm v. Garamendi (Case No. S102251) is whether the information must be made available to the public, as voter-approved Proposition 103 requires, or if insurers can claim it is a protected trade secret.
“Proposition 103 makes it very clear that the public has a right to know whether insurance companies are engaged in redlining, but insurers want to keep that information secret,” said Mark Savage, Senior Attorney with Consumers Union’s West Coast Regional Office. “Public disclosure of this data is critical to ending insurance redlining in communities whose economic livelihood has been undermined by such discrimination.”
In 1999, State Farm sued former Insurance commissioner Chuck Quackenbush, claiming that its redlining data was a trade secret. Consumers Union and the Southern Christian Leadership Conference of Greater Los Angeles, represented by Public Advocates, intervened in the case because they sought the data in order to track potential redlining abuses by insurers. The San Francsico Superior Court ruled for the groups, finding that the public had a right to review the redlining data under Proposition 103. In a unanimous decision, the court of appeal affirmed the ruling.
Shortly after State Farm began losing its case in the San Francisco Superior Court, another group of insurers filed a similar suit against the Insurance Commissioner in Fresno. The consumer and civil rights coalition intervened in that case as well and won a favorable ruling from the Fresno Superior Court, which denied the insurers’ request for a preliminary injunction to keep the redlining data secret while they litigated their full case. Those insurers appealed and the court of appeal ruled that the trial court should have considered more of the insurers’ argument. In the meantime, the State Supreme Court agreed to review the issue.
Since 1994, state regulations have required insurers to file certain basic data to verify whether an insurer is heeding or violating prohibitions against redlining. Under current law, the Department must issue an annual report summarizing the data filed for the previous calendar year. The reports summarize each insurer’s record in all underserved zip codes combined, which makes it difficult to pinpoint where individual companies may be engaged in redlining.
“Public disclosure laws can be a great deterrent to discriminatory practices,” said Jenny Huang, Staff Attorney with Public Advocates. “Home mortgage lenders are required to publish similar data regarding their lending practices, which has proven to be an effecticve way to expand access to home loans in underserved communities.”
The Insurance Department reports show great disparities between the rate at which insurance companies write policies in minority and low income communities versus the rate at which they write policies elsewhere in the state.
In 1995, the last year when a comprehensive report was issued by the state, (16.16%) of California’s population lived in “underserved” communities, but State Farm’s data revealed that State Farm had only 2.59% of its agents in underserved communities combined. While 16.16% of California’s population lived in “underserved” ZIP codes, the average insurer wrote only 5.57% of its private passenger automobile liability policies, 6.62% of its homeowners policies, and 9.55% of its commercial multi-peril (non-liability) policies in these low-income, minority ZIP codes. State Farm’s record was even worse, with only 4.31% of its private passenger automobile liability policies, 5.19% of its homeowners policies, and 9.13% of its commercial multi-peril (non-liability) policies in these low-income, minority ZIP codes combined.
“Redlining hurts California’s low income and minority communities by shutting out crticially needed investment and economic development,” said Reverend Norman Johnson, Executive Director of the Southern Christian Leadership Conference (SCLC) of Greater Los Angeles. “Without commercial insurance, people cannot start small businesses and employ others from their communities. Without homeowners insurance, people cannot buy homes. And without auto insurance, people cannot drive to doctors, schools, grocery stores and work without violating the law.”