companies are accused of redlining because of ethnic or racial prejudice. This discrimination, which some call, "the racial factor". This came about because these companies have consistently lost money in ghetto areas. The companies would have us believe that the fact that they do not write business in black and hispanic neighborhoods is not because they are bigots, but because there are no profits in Red Hook, Harlem and East New York. This is probably true but the fact still remains that racial minorities from certain areas do have access to many insurance companies that write automobile insurance. These individuals are forced into residual markets at far greater premium costs. I have seen maps of the Greater New York Metropolitan area that have been literally redlined to indicate to agents the neighborhoods from which no business will be accepted. Some years ago I was told by a company aut underwriter that they do not write blacks or Hispanics. Other companies solve the "Problem" by not appointing agents in troubled areas. Those agents that write in the non approved sections of New York are sanctioned and if they persist, their agency contract will be in jeopardy. Since New York State law mandates that all motorists carry York euphemistically it residual market or the calls it The New not sell assigned risk plan. New York Auto Insurance Plan. All insurance companies that write auto insurance in the state must participate and are assigned a quota based on their voluntary business. The population of the New York Auto Insurance Plan has grown to over one million vehicles. Most of the major carriers show a loss with this type of business. However there are a few that profit with these one else wants. insureds that no The NYAIP is run like a private club. The Board of Governors consists of fifteen members, eight of which are insurance company representatives and the other seven are called public members. Of these public members, two are appointed by the Superintendent of Insurance, and five are elected by the insurance company These five can not run for office unless they representatives. are nominated and they can only be nominated by the insurance companies. The same individuals that make the nominations also vote for them. "Public Members" is to allow the The purpose of having consumers and their agents have some input to the the NYAIP. Not only are the elections openly rigged, the public members do any substantial business with Not a single member of the office nor operation of but none of the NYAIP. Governing Committee has a store front are they located in areas where most of the clients f the Plan reside. Many of the companies that subscribe to the Plan have to rise written it off as an bad investment. There is rampant fraud that receives less than a cursory glance. Premiums continue because of bad underwriting experience. several exclusively in the business almost companies that do redlined areas and are very successful, provide excellent service, and are the only markets available to Allcity Insurance Company a large portion of New York drivers. and the Executive Insurance Co. are but two of the carriers that offer alternatives to the NYAIP. They are successful because they have developed an expertise that is foreign to the major carriers. Many companies treat NYAIP business as if it did not exist. They allow the losses to go uninvestigated, pay little or no attention to their policyholders and abandoned sound underwriting practices. Several companies are impossible to reach by phone. Their lines are always busy. Others relegate their worse employees to residual market business. The abuses to the public were so rampant that even the Governing Committee was forced to take some action. A plan was company would be able to buy another's devised whereby one assignments. One of the companies with the expertise in this business has been incredibly successful. The Robert Plan has become a major force in the auto insurance industry. They know how to underwrite and service NYAIP business. Over seventy companies have chosen to allow Billy Wallach and his Robert Plan take over all their AIP accounts. Mr. Wallach's secret is hard work and an intimate knowledge of the this type of business. Why haven't the major carriers come over to the Robert Plan? need The main reason is that they don't want to admit that they outside help to run their business. redlining in the automobile insurance industry?" The answer is an undeniable "yes". "Is there a racial factor?" Again the answer is "yes". Some insurance companies insist that there is no racial bias, but the facts speak for themselves. I am personally convinced that official company policy is biased only because of profit motives but as one goes down the corporate ladder there is evidence of blatant discrimination. I have had an underwriter tell me that, "We don't insure Spicks or Niggers. The New York State Insurance effort to depopulate the NYAIP by Department has made every offering incentives to the companies to write in certain inner city areas. There have been few takers. With the exception of the Robert Plan, Empire and a few others, insurance minority motorists. companies stay away from the ghettos and Testimony Submitted By Reverend Charles Cummings, Jr. Association of Community Organizations for Reform Now (ACORN) Washington, D.C. Chapter On Insurance Redlining Before The Subcommittee on Consumer Credit and Insurance Honorable Joseph P. Kennedy II, Chairman of the Committee on Banking, Finance, and Urban Affairs February 24, 1993 |