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Insurance 'redlining' scrutinized by House panel.

Representative Joseph P. Kennedy H (D-Mass.) chaired a ongressional hearing last week to study allegations of iscrimination by insurance companies against businesses and individuals in cities and towns. Kennedy, who chairs the House Banking Subcommittee on Consumer Credit and Insurance, listened to testimony from consumer groups, representatives and regulators of the insurance industry about the availability and cost of insurance in cities.

California Commissioner John Garamendi displayed a map of the city of San Francisco to members of the subcommittee to highlight neighborhoods without access to insurance coverage. Garamendi, who is conducting a study of insurance coverage in response to last year's civil disturbances in Los Angeles, explained that insurance companies avoid insuring areas primarily populated by minorities, because they are looked at as not being as profitable as other communities.

Garamendi said his office is reviewing allegations that when insurance companies do write policies in low-income and minority communities, they provide services inferior to those provided in other communities.

Reverend Charles Cummings Jr., treasurer of the Washington D.C.-based Association of Community Organizations for Reform Now (ACORN), testified that insurance companies use a variety of techniques to avoid business in low-income, and minority communities, causing small businesses to lose their competitiveness compared to their suburban counterparts, housing stock to deteriorate or be abandoned, and residents who can afford to do so to leave their neighborhood.

Cummings told the committee that his organization has devised a ten point plan to aid the problem of redlining in cities. The ten point plan would require disclosure of homeowners policies written by carriers on a census tract basis.

The plan would also require the disclosure of underwriting criteria and of agent location, expansion of the Fair Housing Initiatives Program for testing of insurance companies, and Justice Department enforcement of violations of the Fair Housing Act by insurance companies. Lastly, the plan would subject insurance companies to community support requirements comparable to the community reinvestment obligations of banks and thrifts.

Kennedy, whose committee is reviewing the role of rederally unregulated insurance companies responded: 'When minority citizens must pay more for less, even though they have excellent claim histories, when agents are told by their companieS not to do business in minority and working-- class neighborhoods, and when insurance products are marketed primarily for the upscale and the suburban, then a pattern of conduct by the industry begins to emerge that demands Congressional scrutiny."

Richard Gordon, an intern in NLC's Center for Policy and Federal Relations, is a senior studying urban management and policy at Indiana University.
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Author:Gordon, Richard
Publication:Nation's Cities Weekly
Date:Mar 1, 1993
Words:423
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