Such a change in policy would mean New York is finally using authority it has possessed for years, but never exercised – collecting data that insurance companies are already required to maintain.
Examination of the data could illustrate whether auto and home insurers are offering coverage to all customers in a given area, or just in areas that are profitable.
The ZIP code reports to the state could help detect business patterns that could indicate so-called “redlining” by insurers, a negative practice wherein insurers deliberately avoid offering coverage for certain neighborhoods or communities while accepting business around them. Redlining 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 three decades. Regulators and consumer activists routinely study that data to spot discrimination or redlining.
Accusations and constant pressure on the industry by these groups 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.
About the practice, J. Robert Hunter, director of insurance for the Consumer Federation of America, and former Texas insurance commissioner said, “It’s very interesting and enlightening, and you can see that some companies are avoiding low-income and minority communities.” Hunter adds, “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.
Andrew Mais, spokesperson for the state insurance department, says, “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.”
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 he’s not surprised about it. “New York has become a very weak regulator, and more of an apologist for the insurance companies than a regulator,” said Hunter, adding “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. Still, for years regulators have refused to release the information, citing the insurers’ request for confidentiality because it was competitive data that could harm the companies if it were made public.
A lawsuit by Bronx Borough President Marty Markowitz and a June ruling by the state Court of Appeals finally forced 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. “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.”