Insurance Red-Lining Laws Don't Work

By William L. Clay, Sr. | St Louis Post-Dispatch (MO), October 3, 1995 | Go to article overview
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Insurance Red-Lining Laws Don't Work


William L. Clay, Sr., St Louis Post-Dispatch (MO)


Although the 1988 Fair Housing Amendments Act created an enforcement plan to advance fair housing, discriminatory housing policies continue unabated. While the law often has been effective in preventing blatant red-lining, discrimination continues under the umbrella of insurance underwriting.

Since the enactment of the Fair Housing Act, the Department of Housing and Urban Development, the Department of Justice and the vast majority of court rulings have held that the law applies to property insurance. However, there is no effective enforcement when it comes to fair and equal availability of property insurance.

States have created loopholes that undermine the Fair Housing Act. Missouri law forbids certain red-lining practices - such as refusing to sell insurance because of a property's location or age - but qualifies this requirement if "the denial is for a business purpose that is not a mere pretext for unfair discrimination."

This ambiguity prevents both regulators and insurers from clearly identifying the boundaries of racial discrimination, and it allows insurers to deny homeowner policies because of a property's location or age. In Missouri, this situation is complicated further because the Legislature's Joint Committee on Administrative Rules has the authority to overrule any regulations issued by the Department of Insurance that attempt to prevent insurance red-lining.

Earlier this year, Missouri officials released an insurance industry study showing that although insurance companies did not have established policies to deny homeowner insurance to certain groups, their underwriting practices effectively denied insurance or charged higher premiums to homeowners in predominantly black neighborhoods. In some cases, homeowner insurance rates were 28 percent higher in black low-income areas than in comparable majority white neighborhoods.

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