Insurers target homeowners in inner-city areas.

State identifies 157 zip codes as 'underserved'

L.A. COUNTY - While home buyers in much of California may be having a tough time finding homeowners' insurance, major careers say they're actually pushing to sell homeowners' policies in South Central L.A. and other so-called "underserved areas."

Homeowner policies in general have been more difficult to obtain since the January 1994 Northridge earthquake because California law requires companies selling homeowners' insurance to offer earthquake coverage, and insurers fear further losses if another severe quake strikes.

But homeowners' polices - and hence earthquake coverage too - are being offered in communities deemed by the California Department of Insurance to be underserved.

According to Diane Tasaka, a spokeswoman for Farmers Insurance Group of Cos., that company had sold 9,300 policies generating $3 million in premiums in South Central Los Angeles and other underserved areas between Sept. 1, 1995 and March 31, 1996. Tasaka said Sept. 1 was the kickoff date for a program called Farmers Action for Communities of Tomorrow, or FACT.

Tasaka said Farmers' goal is for FACT to sell 175,000 policies in the first five years of the program, which targets 157 zip codes that the California Department of Insurance has identified as underserved. These zips include 39 within the Los Angeles city limits, as well as 36 in other Los Angeles County cities.

Tom Cordova, a spokesman for State Farm Insurance Co., said State Farm since March 1995 has been marketing homeowners' insurance in 40 of the underserved Los Angeles city and county zip codes identified by the insurance department.

Cordova said the company's goal is to sell 9,400 more policies in these areas. In the 13 months since that effort began, State Farm has sold 1,474 policies there, Cordova said.

While that number is a mere fraction of the number of policies sold by Farmers in underserved areas, Cordova pointed out that State Farm had been limiting the number of new homeowners' policies it sold throughout the state even before the Northridge earthquake because the company feared it was getting close to being overexposed in earthquake coverage.

Pressure from state

Insurers are not yet legally required to implement programs such as those launched by Farmers and State Farm, but pending state regulations would require insurers to choose from three options to demonstrate that they are expanding operations in underserved areas, explained Richard Wiebe, a spokesman for the state Insurance Department. One option, Wiebe said, would be for the insurers to adopt marketing programs such as those of Farmers and State Farm, while the other options would require the companies to collect "massive amounts of information" about their operations and submit it to regulators.

According to the Insurance Department, communities must meet a number of criteria to be considered "underserved." Among these are requirements that the proportion of uninsured businesses or residences must be 10 percent above the statewide average, and that "members of the community have contacted three or more agents or companies directly and have been declined for insurance which they were ready, willing, able and qualified to purchase," according to a report issued by the Insurance Department last year.

Richard Wiebe, a spokesman for the state Insurance Department, said the 157 zip codes being used to identify underserved areas were originally identified in a study conducted as part of enforcement efforts on Proposition 103, the insurance rate rollback initiative approved by California voters.

Tasaka said that, except for a few parts of the state where earthquake risk is especially low, Farmers is selling no new homeowners' policies except in these underserved areas.

The company is selling its policies to homeowners in South Central L.A. and other underserved areas through about 75 independent agents who either have offices in those areas or who already do business there, said Tasaka. She said all of the company's insurance is sold through independent agents rather than agents employed by the company.

According to Tasaka, Farmers established its FACT program "to deal with the perception that we're not serving those communities as well as we should, and for strategic business reasons." The strategic reasons, she said, are that "minority populations throughout the state are becoming the majority, and since California is our most important market, we have to learn to serve those populations.... To be honest, we just haven't served those areas as well as we should have."

A number of consumer groups have pushed for programs to make homeowners' and auto insurance more readily available in underserved communities. Among those groups are The Greenlining Institute, a San Francisco-based public interest group which acted as a consultant to State Farm in its program, and the Los Angeles-based Proposition 103 Enforcement Project.

Gina Calabrese, senior counsel at the Proposition 103 Enforcement Project, said that, although the group's primary focus is auto insurance, it is also concerned about the "traditional lack of availability and affordability of all types of insurance coverage in underserved areas."

Calabrese said insurers' various programs to sell homeowners' policies in the inner city are "laudable." But, she added, consumer groups will remain skeptical about the long-term value of such programs until they prove themselves over time.

"In the context of the overall problem of redlining, efforts like this are just Band-Aids on really bad wounds. We want to see a systematic change in the way insurance is underwritten so that is it available and affordable for everyone," Calabrese said. "Insurance companies create a lot of fanfare when they introduce programs like these," Calabrese added, "but they often don't keep them going for the long term. We really need companies to take root in these communities."