From the Office of State Senator Rodney Ellis

For Immediate Release
October 8, 1998
Contact: Rick Svataro , (512) 463-0113

Legislators Denounce Insurance Redlining Practices

Gatesville (4/8/98) Austin, TX -- Texas legislators today met to condemn the discriminatory insurance practice known as redlining and comment on the Texas Department of Insurances proposed $10 million fine against Nationwide General Insurance Company.

The conference comes in reaction to a September 29 recommendation by Texas Department of Insurance attorneys to fine Nationwide General Insurance Co. after it discovered that the company intentionally avoids minority ZIP codes in marketing and selling auto and homeowners insurance.

Department staff recommended that Nationwide and its subsidiaries be fined $10 million for invidious discrimination, which over an extended period of time has systematically restricted access. The staff report further states that Nationwides marketing strategy is meant to systematically exclude minority customers from the market in which Nationwide operates. The Department is also investigating other insurers for similar practices.

Revelations of discrimination to this extent are unprecedented in Texas history, said Senator Rodney Ellis (D-Houston). I commend the Texas Department of Insurance for taking on illegal discrimination in the insurance industry.

Senator Ellis further urged Insurance Commissioner Elton Bomer to follow through in punishing all insurers who deliberately turn their backs on minorities. Just because Nationwide happens today to be the main act in the Redliners Club`, doesnt mean we should let our guard down with the rest of the market, he said.

Senator Ellis was the Senate sponsor of a bill passed by the Legislature in 1995 to prohibit insurance companies from denying insurance to individuals because of age, gender, race, color, religion or geographic location.

I believe we should continue to diligently address the question of insurance availability for all Texas citizens, stated Representative Glenn Lewis (D-Fort Worth), a member of the House Committee on Insurance. The intentional discriminatory practices of redlining by insurance companies like Nationwide demonstrates that availability of auto and homeowners' insurance to certain Texas communities is still a problem. I commend Senator Ellis' continuing efforts to highlight these unfair practices on behalf of his constituents and our citizens.

The Department review was spurred by a request from lawmakers during the last session after a private Texas report revealed that Nationwides market share for automobile insurance in low minority ZIP codes is nearly three times greater than it is in high minority ZIP codes. The report coincided with a $13 million settlement by Nationwide after the U.S. Department of Justice charged that the insurer had adopted discriminatory practices in other parts of the country.

Senator Gonzalo Barrientos (D-Austin) was the principal author of a letter to Commissioner Bomer to ask the Department to look into the reports of redlining and propose solutions to the Legislature. Ten state senators signed the letter.

"Texas needs to send a strong message that we will not tolerate discrimination in any way, shape or form, stated Senator Barrientos. The Department's proposed $10 million fine punishes Nationwide for its discriminatory practices and puts other agencies on notice that redlining will cost them dearly."

While legislators credited the Department for its response, the importance of private watchdog groups was also emphasized. During the conference, maps were displayed by the legislators exhibiting areas where high numbers of automobile insurance rejections corresponded with high numbers of minority residents. The information may reveal a serious problem for many Texans who can afford insurance and are willing to buy it, but are refused on the basis of illegal and unsound underwriting guidelines.

The maps were produced with simple policy and cancellation data previously available to the public but now blocked from public view due to litigation initiated by insurance companies, Senator Ellis stated. I believe consumers have a right to know why their policy costs what it does, why they cant get coverage, and what they need to do to protect their property and families. Access is also important to tell which companies are good corporate citizens, and which ones dont care whether they cheat their customers or their competitors.

In response to growing concerns regarding discrimination and access to affordable insurance, Senator Ellis promised to sponsor legislation next session that would improve consumer information on insurance rates and claim responsiveness. He also pledged to take measures to increase access to affordable automobile insurance.

Unfortunately, Texans who work hard and play by the rules are often barred from coverage or can't obtain the information they need to be smart insurance consumers, Senator Ellis said. The Legislature can make a difference in protecting families property and pocketbooks next session by improving Texas insurance laws.