In honor of Black History Month, we tasked our high school intern from the UAU program with researching and reflecting on systemic racial issues within the insurance industry.
We continue to have faith in the over-arching idea that we bend towards good. By recognizing the faults of the past, we can make our community better for us all.
Below are his findings:
Racial injustice in Insurance
Did you know that racism still exists in the Insurance Industry today?
Yeah. It’s true:
According to a study done by Marsh in 2018, in collaboration with the National African-American Insurance Association (NAAIA), African Americans are sadly underrepresented in Insurance. Additionally, they frequently experience racism and racial bias.
The Insurers might say it is just a belief, an assumption. They say that there is no evidence to back that up. That they don’t ask for a person’s race. That everyone is equal.
Actually…
Here is a data table from the Consumer Federation of America:
Interesting right? As shown in the table, there is a big disparity in terms of rates and penalties. White homeowners get almost 30% more of a discount than African Americans based on rating factors. African American clients with a credit score lower than 620 get almost 20% more penalties than whites!
The CFA also found that in zip code areas with black residents, the premiums that the residents get are 60% higher than zip code areas with white residents.
Coincidence?
“When insurers base premiums on drivers’ socio-economic status, they are invariably doing so in a manner that disproportionately targets African Americans with higher prices,” says CFA’s insurance expert Doug Heller.
“In every state, unfair discrimination is illegal, yet, on average, African American drivers still pay more for the exact same insurance coverage as white drivers.”
J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner.
On the bright side, some companies and states have started taking steps to try to fix this inequality and support the colored community.
In 2014, the Affordable Care Act (ACA) went into effect. This narrowed some of the differences between racial coverage. The data shows that the ACA has led to a “historic reduction” in racial disparities in health care. The gap between black and whites in terms of them being uninsured narrowed and dropped by 4.1%
In 2018, The Department of Finance in NY has created regulations that ensure NY drivers from discriminatory auto insurance rates.
In line with NY’s DOF, major insurance companies like Liberty Mutual and Allstate have taken measures to get rid of the impact of clients’ education level and occupational status.
Compared to pages and pages of data and other information available about the racial disparities, the information regarding the steps taken to fix them is way less.
Although the data is not convincing, people have begun to take steps. Just like the issue regarding slavery started to be addressed when people started taking steps. Slavery→ Segregation→ Now. We have come a long way and it all starts with some people taking little steps.
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