Insurers may need to report denials
Data could show redlining trends
The state Department of Insurance may start requiring auto and home insurers to report denials, nonrenewals and cancellations of insurance policies by ZIP code statewide, possibly subjecting that information to public scrutiny, The Buffalo News has learned.
Such a change in policy would mean the state is finally exercising an authority it has possessed for years, but never used. It would mean collecting data that insurers are already required to maintain.
And it could shine a light on whether auto and home insurers are offering coverage to all customers in a given area, or just in areas that are profitable.
“This is something we will discuss,” said Insurance Department spokesman Andrew Mais, following inquiries and a Freedom of Information Law request by The Buffalo News.
The ZIP code reports to the state could help detect business patterns that could indicate “redlining” by the insurers. That refers to a policy in which companies deliberately avoid certain neighborhoods or communities while taking business around them. It usually applies to low-income and minority areas, and can represent discrimination.
Similar disclosures have been required for banks and mortgage lenders under the federal Home Mortgage Disclosure Act for more than 30 years. Regulators and consumer activists routinely study that data to spot discrimination or redlining.
Their accusations and constant pressure on the industry have led to significantly more lending in low-income and minority neighborhoods, as well as hundreds of billions of dollars in public lending and investment commitments by banks.
Consumer advocates have long accused insurers of engaging in similar practices, but lacked the proof. Requiring detailed reports by ZIP code and making them public would change that.
“It’s very interesting and enlightening, and you can see that some companies are avoiding low-income and minority communities,” said J. Robert Hunter, director of insurance for the Consumer Federation of America, and former Texas insurance commissioner. He’s reviewed such data in California. “Companies that are doing the right thing have nothing to fear.”
State law specifically forbids discrimination and redlining in auto, home and fire insurance, by prohibiting insurers from making underwriting decisions based solely on where the applicant lives. It also prohibits underwriting homeowners or fire insurance based only on whether the home is served by a volunteer fire department.
“Protecting consumers is the Insurance Department’s highest priority, and to ensure that consumers are treated fairly and lawfully, the Department investigates and responds to all allegations of redlining,” Mais said.
The regulation that implements that law — known as Regulation 90 — requires insurers to track and keep records of approvals, denials, nonrenewals and cancellations by ZIP code. It also mandates they provide records to the Insurance Department “upon its request,” although it says reports “containing the information required . . . shall be filed with the Insurance Department annually.”
But state officials said that means insurers are only required to report the data upon request. And while the department has a standing request for data for New York City by ZIP code, it asks for data on only a county level elsewhere.
That’s not very helpful for monitoring behavior, and represents a failure on the part of regulators, Hunter said, although one which he’s not surprised about. “New York has become a very weak regulator, and more of an apologist for the insurance companies than a regulator,” he said. “This Insurance Department is really bad.”
The state law also considers such data to be a “public record,” subject to release under the state Freedom of Information Law. But regulators refused to release the information for years, citing the insurers’ request for confidentiality because it was competitive data that could harm the companies if it were made public.
It took a lawsuit by Bronx Borough President Marty Markowitz and a June ruling by the state Court of Appeals to finally force regulators’ hands.
Mais could not say why the department has never demanded insurers provide ZIP code data for the entire state when regulators already possess the authority to do so. But having the power is still a deterrent, since insurers know if the department gets any complaints, it will request the full detail.
“We rely on such data in investigating inquiries that would indicate that redlining has occurred or may be occurring,” he said. “We have found this process to be effective and efficient in monitoring compliance.”
