'Subtler form of redlining' confronts Missouri buyers of car insurance, report says - Insurance News | InsuranceNewsNet

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April 5, 2017 Newswires
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‘Subtler form of redlining’ confronts Missouri buyers of car insurance, report says

Kansas City Star (MO)

April 05--People in Missouri's minority neighborhoods face excessive prices for basic auto coverage because of insurance company practices that Consumer Reports and ProPublica say suggest a form of redlining.

A report Wednesday by the two publications cited their own research using data from four states -- Missouri, Texas, Illinois and California. The authors said the data showed that insurance premiums in those four states are higher in ZIP codes with largely minority populations even when adjusting for the insurance risks in those neighborhoods.

"This disparity may amount to a subtler form of red-lining, a term that traditionally refers to denial of services or products to minority areas," the online report said.

Julia Angwin, a senior reporter at ProPublica, said largely minority neighborhoods routinely see higher prices than nonminority neighborhoods for a variety of services and goods. The report sought to test the insurance industry's contention that higher risks accounted for higher premiums for basic auto liability coverage in largely minority markets.

"Using the best risk numbers available, they (premiums) still look somewhat unexplainable for many insurers in many states," Angwin said.

In Missouri, the authors looked at 25 insurers' premiums by ZIP code, comparing premiums and claims losses in largely minority areas with largely nonminority areas. Angwin said they found 21 of the 25 companies had charged premiums in Missouri that were at least 10 percent higher in largely minority ZIP codes than differences in insurance companies' claims losses would explain.

Among the four states, the pricing disparity was least in California and greatest in Illinois. California, the authors said, also has the most insurance regulation among all states, and Illinois is among the least regulated.

Angwin called Missouri's auto insurance regulation "middle of the road," which made the finding of unexplained price disparities all the more significant.

"If this is what a normal state looks like, then this really could be a national problem," Angwin said.

Redlining often is more closely associated with the housing market and was the subject of complaints raised last year in a Kansas City-area bank merger.

Earlier this year, auto insurance premiums in Kansas City were among those that the Consumer Federation of America said were higher for drivers who had been in accidents even though they were not at fault. Consumer Federation and the Consumer Reports/ProPublica reports looked at basic liability coverage, the kind most states require drivers to buy.

The Consumer Reports/ProPublica report cited some challenges to its findings. California's Insurance Department, for example, claimed the report's methods were flawed because it compared each insurer's specific premiums to average claims losses for the industry in each ZIP code. Companies won't provide their own claims losses by ZIP code.

"The study's flawed methodology results in flawed conclusions" about discrimination in setting premiums, the California Department of Insurance said, according to the report.

Consumer Reports and ProPublica allowed that firms' claims losses in a ZIP code could vary significantly and influence the comparisons, but they added that this would be unlikely to lead to "a consistent pattern of higher prices for minority neighborhoods."

The report focused on the four states because they were the only ones that collect insurance liability claim payouts information by ZIP code. Requests for that information were made of all 50 states and the District of Columbia.

Mark Davis: 816-234-4372, @mdkcstar

___

(c)2017 The Kansas City Star (Kansas City, Mo.)

Visit The Kansas City Star (Kansas City, Mo.) at www.kansascity.com

Distributed by Tribune Content Agency, LLC.

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