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Austin TX 78704
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Nationwide, USAA, Farm Bureau cited for discriminatory practices
Insurance Department criticized for inaction

(Press Release, April 30, 1997)

AUSTIN, TX -- Three of the largest automobile insurers in Texas Nationwide, USAA and Farm Bureau fare among the worst in making insurance available and affordable to low income and minority areas, according to a study released today by The Center for Economic Justice. State Farm and Safeco also have a lower market share of insured drivers in minority areas than they do in Anglo areas.

The study by the nonprofit group CEJ shows that drivers in poor and minority communities are disproportionately rejected by standard, lower-priced insurers, a practice known as "redlining." The analysis of individual company market data supplied by the Texas Department of Insurance complements a recent CEJ study of urban drivers placed in sub-standard usually county mutual companies.

D.J. Powers, attorney for the Center, called upon Texas Insurance Commissioner Elton Bomer to act decisively to put a halt to the practice, saying that the commissioner has "ample authority under the law to investigate and halt illegal marketing practices that disproportionately affect minority areas."

"The state requires all drivers to carry auto insurance, so it has a duty to protect consumers from unfair discrimination by insurers. Yet, the Department of Insurance has failed to take action against several large insurers who the Department knows are violating the law," Powers said.

The study urged the Department to enforce current laws that prohibit unfair discrimination, adopt new rules to prevent unfair discrimination, and use testers to catch insurers who discriminate against Texas drivers.

Following is a recap of the eight companies analyzed:

  • Nationwide: In predominantly Anglo areas of Texas' largest cities, Nationwide controls 3% to 6% of the market. But in minority areas it covers less than 1.5 % of the insured vehicles. "Nationwide is not on your side ... if you live on the wrong side of town," the study said.
  • USAA: Like Nationwide, USAA writes far more of the market in Anglo areas than it does in minority areas. For instance, in San Antonio, USAA writes more than 25 % of insured vehicles in Anglo areas but less than 5 % in minority areas.
  • Farm Bureau: The company's statewide results may be partially explained by its large rural market, where the non-Anglo population is lower. However, the company also controls a substantial urban market, and in urban areas Farm Bureau's market share also drops dramatically in minority zip codes.
  • State Farm: State Farm is the state's largest auto insurer. But on a statewide basis, State Farm's market share drops from 31 % in Anglo areas (or 10 % higher than its statewide market share) to only 19 % in non-Anglo areas (or 32 % below its statewide market share).
  • Safeco: With the smallest market share of any of the companies surveyed, Safeco drops to about half its Anglo area market strength in non-Anglo areas.
  • Farmers: Farmers is the second largest auto insurer in the state. Its market share in high-minority communities is less than its market share in low-minority communities, but to a lesser extent than the other companies.
  • Allstate: While Allstate shows strong standard market presence in minority communities, the company places more consumers in these areas in its higher-priced county mutual company. In other words, it insures about the same portion of the market in minority areas, but generally charges those consumers higher rates.
  • Geico: Perhaps the brightest unqualified spot in the survey, GEICO's market share is as great or greater in minority communities as it is in Anglo areas.

The earlier study by CEJ found Texans in poor and minority communities are being disproportionately rejected by standard insurers. Instead, the companies sell these customers coverage through a much higher priced substandard company (usually a county mutual company) or refer them to the Texas Automobile Insurance Plan Association (TAIPA), the state's residual auto insurance market.

The Center for Economic Justice is a Texas nonprofit corporation dedicated to protecting the interests of low-income consumers.