bad locks on your doors. There are other things not under your control.

We have very segregated cities in this country. A lot of those cities, minorities tend to live in older housing stock. I think it is a question of social policy whether it is fair or not fair to underwrite based on things that people cannot in fact control.

What the industry has been doing is underwriting in broad strokes based on very general things, and there are ways of underwriting risk on a much more specific basis that would be much fairer to individuals, especially to individuals who are in fact good risks in particular neighborhoods.

Mr. MCCANDLESS. If we were to reduce what has been testified to here, that part of the equation which deals with discrimination, as it has been outlined by key witnesses, how far are we from what we are trying to accomplish?

Reverend CUMMINGS. I would say that we are not asking for a special incentive. We find that under the FAIR plan you are overpriced and you have insurance at substandard levels. And then we also have instances when someone calls in for a quote. The FAIR plan isn't even explained as an option.

So therefore, in the instance of discrimination, when we call in, when they hear the community and they hear your race or your gender, they simply say, We don't insure in that area.

Mr. MCCANDLESS. The chairman uses yellow slips here rather than pink slips. My time has expired.

Thank you.

Chairman KENNEDY. Thank you.
Reverend Flake.

Mr. FLAKE. Thank you very much.

Mr. Chairman, this has been a most enlightening hearing. It seems, being both a preacher and a politician, I guess the liability on me is great, and that is the reason I have so much trouble dealing with insurance. And then we discovered that Al is an insurance man. I always wondered what the deal was.

My question, there is a problem here just in terms of the overall sense of perception that one gives to making a determination for whether a community, and we are not talking individuals, sadly, but whether a community is really worthy of having its citizens, the persons who live there, insured.

It seems to me that there are assumptions that are made, assumptions that properties will be maintained poorly, the assumptions that drivers act differently, and assumptions in general during the insurance appraisals, and I would say to you I have some idea of how it works. I develop properties through the church in what is called an urban community. And the reality is that those are not substandard properties, nor is it a substandard community. Income ranges in the community, the larger part of the community I serve, which is Queens, New York, is representative of a home ownership population. That home ownership population pays more on a per capita basis for insurance than people living a few miles away.

As a matter of fact, I live 7 miles from Ray McGrath. I live inside the city line. He lives inside the county line. He was the Congressperson for Nassau County. I lived three blocks from the

county line. The difference between what I pay, living three blocks from the county line, on a home that is worth about $300,000, and what somebody across the county line pays for a home that is worth much more, is less in insurance. And I pay much more than they do.

Now the reality, then, is that there has to be some determination made about why I pay more insurance. It is certainly not because of my community. It is a strong community. As a matter of fact, I would suggest to you that in the part of the community I live in, the homes are probably better than they are across the county line. They are. They are not probably. They are. Yet the insurance rates are different.

I have a difficult time. I have a church that is valued at about $3.8 million. We have to farm around regularly for insurance, because every time something happens in the community, the church is not taken as an individual entity, but it is viewed within the context of the community in which it is found, even though it sits next door to the fire house. So the question is not about whether or not can you get fire services soon enough. The reality is that somebody made a determination that it shouldn't be.

Mr. Farmer, I will shape a question and then I will stop. Seventeen years ago when I moved to Queens, we had almost on every block where there were businesses, insurance agencies. Allstate, you name it. Seventeen years later, in the most recent analysis by my staff, we have very, very few agencies left in that community. Is there a reason for that?

Now, let me just say, this community started changing about 22 years ago. So 17 years ago the change from a predominantly white to a predominantly black community had not taken place fully. And over that time, as there was white flight, there was also insurance agency flight. And I would like to know if you can tell me if there might be some other reason than what I presume to be the problem.

Mr. FARMER. Congressman, I am not familiar with the neighborhood

Mr. FLAKE. You don't have to be. It is the same thing whether you go to Pittsburgh, Philadelphia, Atlanta, Chicago, Dayton, Ohio, Milwaukee. It doesn't change.

Mr. FARMER. But I would say in general that insurers, in terms of appointment of minority agents, can do better. The question is, in terms of other types of businesses within the urban area, there is and can be fairly well documented in urban areas across the country a variety of services that are not available in certain communities.

What is the reason for that? Presumably, the reason is that businesses underestimated or were not aware of the economic opportunity that exists in those communities.

Should that happen, should the people in these communities have to travel long distances to find services that they need? No. Can we do better? Yes. I am trying to be responsive to your question.

Mr. FLAKE. You said that there is a shortage of minority agents. What would make those agents who were in that community-and you are right, in most instances they were white agents, who in

sured those same properties before, who closed shop and left. The question then is, are you not suggesting white agents cannot sell to African-American constituents or Hispanic constituents?

Mr. FARMER. I am not suggesting that, sir.

Mr. FLAKE. Nor can they do business in those communities. Or does it become a problem that their assumptions and presumptions of risk are so great that they don't even take the chance or take advantage of what I consider to be the opportunity?

Mr. FARMER. I think that 25 years ago, after-and in particular, after civil disturbances in Washington, DC and other communities, that the insurance industry as an industry canceled policies and left those areas. We created the FAIR plans then to meet that insurance need.

It is our testimony that the FAIR plans have met the need of basic property insurance as a cornerstone of the ability to obtain credit to have businesses. And so businesses can get basic property insurance.

Mr. FLAKE. So that relieves the $2 trillion industry from any responsibility or obligation to try and do its part in those communities? Is that what you are telling me?

Mr. FARMER. In terms of urban investment, the life insurance industry has participated, the casualty industry has participated in varying degrees with the Neighborhood Reinvestment Corp., and other groups in terms of lending.

Can we do more? Yes.

Mr. FLAKE. I ask unanimous consent for 1 minute so Mr. Squires can answer the question.

Thank you.

Mr. SQUIRES. A couple of responses. I have had agents come to me and say that they can make money in the inner city of Chicago and in Milwaukee and they can't get a company contract. And these are agents who are profitable, they have a profitable book of business, and they are the frontline underwriters. They are out there on the streets and they know the neighborhood. And these are guys who are out there to make a profit. These are not cardcarrying members of the NAACP. They want to make a profit. They can't get a company contract.

The insurance industry is quite capable of being quite creative when it wants to be. When the MGM Hotel burnt down in Los Angeles, several companies came forward to offer retroactive insurance. I called my agent to see if I could get retroactive automobile insurance; she thought I was crazy.

When it comes to other situations, for some reason, we just can't do it.

Mr. FLAKE. Thank you.

My time is up. You will have to respond to the Chair for additional time.

Chairman KENNEDY. We will try to come back at the end, because we are just keeping other members waiting and it is just not fair to the people who have been waiting.

Peter King.

Mr. KING. Thank you, Mr. Chairman.

Congressman Flake, the next time I see Ray McGrath I will tell him you what you said about his neighborhood.

Mr. Carbajal, you described some vivid instances of clear-cut racial discrimination. In New York State, who investigates discrimination complaints, the attorney general or the insurance department?

Mr. CARBAJAL. The insurance department investigates fraud more than anything else. I don't know of anyone that investigates discrimination except the commissioner of human rights or something like that.

But as far as insurance is concerned, no one has ever bothered to look into that, that I know of.

Mr. KING. Congressman Flake, do you know if the State insurance department has jurisdiction over discrimination?

Mr. FLAKE. I don't know for sure.

Mr. CARBAJAL. They may have jurisdiction, but they don't do it. They have only a few agents to cover the whole State. Unless it is major fraud they can't even look at it.

Mr. KING. You have never heard of anybody filing a complaint with the State insurance department alleging racial discrimination?

Mr. CARBAJAL. Once. And this was a Hispanic woman who wanted to buy insurance in Long Island, and I am going to tell it like it is. The underwriter, she was on a speaker phone. The underwriter told the broker when he called in, because sometimes you call in the line and tell them, I have a white female, whatever it is, and this woman's name was Perez, and he said, "You know, Ms. Perez," so on and so forth, and the guy says, "Look, no spicks, please. We told you before, no spicks." So the woman heard it.

This woman happened to be the secretary to the State prosecutor or something like that, some type of prosecutor from Albany, and that case was looked into. That is the only one that I know of.

Mr. KING. Mr. Squires, in Wisconsin, have you forwarded any cases on to the attorney general or the State insurance commission?

Mr. SQUIRES. Some complaints-we have an antiredlining law in Wisconsin. We are one of the few States that have one.

Mr. KING. Who enforces it?

Mr. SQUIRES. Nobody. The insurance commissioner has authority.

Also, we have the Department of Industry, Human and Labor Relations which has an equal rights commission which does enforce a housing prohibition. So I think in our State, in most States, there are unfair trade practices acts which would exclude racial discrimination, that I guess every insurance commissioner's office could enforce. That is slightly different than a redlining geographic issue. Mr. KING. I know with real estate,-you are saying that as a practical matter the insurance industry in New York State has no concern at all about being reported or being investigated for racial discrimination?

Mr. CARBAJAL. I have to say yes to that. I have to say yes to that.

Mr. KING. Out of curiosity, you are at 140 Smith Street. What neighborhood is that?

Mr. CARBAJAL. Caroll Gardens, Boerum Hill. It is two blocks in from Atlantic Avenue.

Mr. KING. Do you do business_with-obviously you are in the inner city. Do you have blacks and Hispanics? Do you write policies for them?

Mr. CARBAJAL. In my career, I spent about 20 years of that in Red Hook, and this is why I graduated to Boerum Hill.

Mr. KING. You said before that the Empire and one other company have had profitable experiences working in the inner cities. Why wouldn't the other companies do it? Is it just blind discrimination? To me, if a buck is to be made, you would think they would make it.

Mr. CARBAJAL. This is an interesting subject that is always on my mind.

Mr. KING. You seem to have a lot on your mind.

Mr. CARBAJAL. Quite a bit. I have never done anything else except insurance all my life. That is my first job, and I will die an insurance broker.

Several companies are making good money on this thing, and the reason is that they know what they are doing. They know how to underwrite these areas. Some of the larger companies don't care. They don't want it, they are not interested, don't bother me. That is the attitude that they have.

The Robert plan is making a fortune. They are doing very, very well. So is Empire. They know what they are doing.

Mr. KING. Have you ever thought of filing any complaints or forwarding any recommendations on to the State insurance department?

Mr. CARBAJAL. No, I never thought of it.

Mr. KING. Is it ever brought up at industry meetings, this issue? Mr. CARBAJAL. Redlining is brought up all the time. I write for a magazine, the Insurance Advocate, and in the last 20 years I don't think an issue has gone through where redlining hasn't been one of the stories in there, either from New York, California, Pennsylvania, or New Jersey. Those are the main redlining States. Occasionally, Connecticut.

Mr. KING. Obviously, you have come down here today and testified, which I commend you for, but did you ever feel an obligation to file a complaint? Did you ever feel an obligation to report this to the State attorney general or the State insurance department or the city commission on human rights?

Mr. CARBAJAL. I have been a speaker many, many times at different hearings that have been held, and I brought it up maybe a 100, 200 times. That is all that happens. You just bring it up and then it dies. That is why I am so pleased with this hearing, because this, I think, will give it the push that it needs to have something done.

Mr. KING. Thank you very much.

Thank you, Mr. Chairman.

Chairman KENNEDY. Thank you very much.

Tom Barrett.

Mr. BARRETT. Thank you very much. This is an issue that burns deeply in my soul coming from Milwaukee, Wisconsin. Wisconsin is a perfect example of the State that you have talked about a lot.

I live 100 yards from a suburb, and my auto insurance rates are between 80 and 90 percent higher than they would be if I lived 100