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1701A S. 2nd Street
Austin TX 78704
(512) 912 1327
(Fax) 912 1375

pdficon.gif (224 bytes) This report also available in pdf format

Auto Insurance Redlining in Texas:
Availability Worsens
April 1997

Executive Summary

Texas auto insurers continue to redline drivers who live in low-income and minority communities, according to data provided by the Texas Department of Insurance.

This new analysis of urban drivers placed in sub-standard companies (usually county mutual companies) or assigned to the Texas Auto Insurance Plan Association (TAIPA) shows that drivers in poor and minority communities were disproportionately rejected by standard insurers and forced into the higher cost non-standard and assigned risk markets.

Despite several studies, acknowledgement of the problem and "commitments" by insurers to make affordable insurance more available in low-income and minority communities, the overall rejection rate increased and insurance availability worsened over the past five years.

The new analysis confirms several earlier studies of insurance availability in Texas cities, including 1993 studies by the Office of Public Insurance Counsel (OPIC) and the Texas Department of Insurance (TDI), 1994 studies by TDI and the Austin American-Statesman, and a new study by the Fort Worth Star-Telegram.

While redlining continues, consumers no longer have an affordable alternative to non-standard coverage. In 1992, the TAIPA offered coverage at reasonable rates to those rejected by the standard market. In the past two years, however, TAIPA rates increased to unaffordable levels—almost twice the state benchmark rate. Because of the excessive rates, TAIPA is no longer a safety valve for consumers in redlined communities. Instead, many consumers who want to buy insurance and comply with financial responsibility laws simply cannot afford to and become criminals.

In essence, county mutuals and the TAIPA have become a high priced dumping ground for low income and minority drivers who do not pose a higher risk for auto collisions but who have fewer option when they shop for a better deal. These practices undermine the financial responsibility laws, criminalize poverty and deny low-income and minority communities equal opportunity in the insurance market.


In light of these and previous similar findings, the Center for Economic Justice recommends the following:

  • Implement regulations to ensure that insurers offer drivers with no moving violations or at-fault accidents a policy in their standard or preferred company;
  • Cap the cost of a policy offered through the TAIPA at 145 percent of the standard market benchmark rate;
  • Enforce existing anti-redlining statutes and regulations;
  • Prohibit the use of unfair underwriting and rating factors, including credit history and prior insurance carriers.

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