In March 2018, legislation was introduced by U.S. representative, Mike Takano, that would require federal authorities to examine unfair racial disparities in California auto insurance premiums.
Takano’s legislation was proposed after Consumer Reports and ProPublica co-published articles reporting that some major auto insurers are charging higher premiums in supposedly “risky” California African American and Hispanic neighborhoods than in similarly “risky” predominantly white California communities. In fact, the publications reported that auto premiums in minority communities were 10 to 30 percent higher than premiums in white communities with the same or similar incidents of vehicle accidents.
The analysis of those publications revealed that pricing disparities between neighborhoods mostly inhabited by minorities versus mostly white communities were substantially wider than differences in risk could explain. The two publications reported that higher auto insurance premiums for minority communities may be a subtle form of “redlining,” a term that refers to denial of fair, accessible and affordable services to minority areas.
The Consumer Reports and ProPublica articles state that higher insurance premiums for vehicle owners in minority areas may be a historical repeat of when racial discrimination by businesses was unquestioned. In California, both articles reported, insurance companies may be intentionally penalizing minority areas for no legitimate reason.
According to Takano, if his proposed legislation is passed, it will help determine whether minority drivers are being discriminatorily overcharged for insurance premiums for reasons that have nothing to do with accident risks. The Consumer Reports’ and ProPublica articles assert that the auto insurance overcharges are specifically targeting predominantly African American and Hispanic California communities.
Currently, Takano stated, the lack of insurance companies’ transparency makes it impossible to address racially disparate premiums, and the proposed legislation, if enacted, will force transparency. When such factual data is revealed, it should prove to be a violation of certain national and California laws when auto insurance premiums are higher merely because of a community’s minority status.
Not surprisingly, David Snyder, vice president of the Property Casualty Insurance Association of America protested the legislation. Snyder asserted that, if passed, the proposed legislation will duplicate existing regulations that already govern insurers, protect consumers, foster competitive insurance markets, and prevent unfair discrimination. If passed, taxpayers will be unnecessarily forced to fund what he considers to be unnecessary duplication of existing regulations.
It seems possible that insurance regulators don’t want consumers to know that their higher auto insurance premiums may be blatantly racially discriminatory.
Civil rights groups support Takano’s proposed legislation. In low-income communities of color, people have immense difficulty paying for mandatory auto insurance because it is excessively expensive, said Sam Brooke, deputy legal director of the Southern Poverty Law Center. “This creates a vicious cycle where, because they can’t afford [auto insurance], they get additional tickets with mounting fees.”
Yet, insurance companies have defended their pricing for decades, offering unsubstantiated evidence that the risk of accidents in minority neighborhoods is greater despite actuarial facts to the contrary.
Robert Hunter, director of insurance at the Consumer Federation of America partially concurs with civil rights groups. Hunter states that while higher auto insurance premiums in minority areas may not be based on race, irrelevant non-driving criteria such as education and occupation factor unfairly into setting auto insurance rates and have nothing to do with a community’s actual vehicle accident rates.
The Federation published a study that found rates are substantially higher in minority zip codes for no discernable reason. It seems clear that basing auto insurance premiums on a consumer’s education and occupation is unfair and discriminatory.
But even affluent minority neighborhoods are sometimes penalized simply because of race or ethnicity. Pernell Cox, who lives in a wealthy South Los Angeles community and has a safe driving record, pays 13% more for his auto insurance than a 30-year-old female safe driver who lives in a predominantly white Los Angeles suburb.
In the midst of the auto insurance premiums controversy instigated by Consumer Reports and ProPublica’s articles and Takano’s proposed legislation, California regulators required two major auto insurers to adjust insurance premiums to reflect community accident rates per capita rather than base rates on minority population and density.
A simple question that seems to have no honest answer from auto insurance companies is if the insurance industry doesn’t set premiums based on minority community density, then why does the disparity in auto insurance prices exist for safe minority drivers over safe white drivers?
Because auto insurance is required by California law, if a driver can’t afford the premiums, they face exorbitant fines and license suspension if caught driving without insurance. When uninsured drivers whose licenses have been suspended go to jail, the economic disparity devastates them, their families, and their communities. Such discriminatory business practices may cause roadblocks to upward mobility and make simply paying the rent formidable. Higher premium prices force those least able to shoulder those premiums to forego other essential necessities such as adequate food and housing simply to pay their car insurance.
Consumer Reports and ProPublica’s findings are disturbing.
Rachel Goodman, an American Civil Liberties Union’s (ACLU) Racial Justice Program staff attorney, said “Those publications’ reports fall into a pattern that we see all too often — racial disparities allegedly result from differences in risk, but that justification falls apart when we drill down into the data.”
It’s discouraging that despite the protections of the 1964 Civil Rights Act, it’s clear that racially designated zip codes matter in our still segregated society. In addition to limited economic opportunity, living in what’s classified as the wrong zip code means you will pay more for car insurance regardless of your and your neighbors’ history of safe driving. For many poorer people of color, it’s a devastating vicious cycle.
With a solid reputation for vigorous representation of those whose civil rights have been denied, the Los Angeles law team at V. James Desimone has the skills, experience, and resources to fight against racial discrimination. Over the past 30 years, attorney DeSimone has been fighting for the legal rights of his minority clients in Los Angeles, Orange County, San Bernardino County, and throughout Southern California.
To schedule a free, no obligation, respectful consultation to determine whether you have any type of discrimination case, call attorney James DeSimone at 310.693.5561. If you prefer to email., please use our contact form to send a message.