Insurance Redlining

Insurance Regulation: for Whom?

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Update of June 30, 2003: Below is a summary of a presentation Inner City Press / Fair Finance Watch made, by invitation, to the National Association of Insurance Commissioner's NAIC / Consumer Liaison Committee on June 21, 2003:

Let the Affected Public Be Heard, For and Against Insurance Company Mergers

by ICP / Fair Finance Watch, 2003

   When insurance companies are acquired, how can the public be heard? Who reviews the impacts, on consumers, on competition, and on the public interest?

   The issue is raised by several pending mergers... Some are predicting further insurance deal-making this year, in a delayed reaction to the repeal of the Glass Steagall Act in 1999. Even without that legal change, mergers viewed as involving primarily insurance, such as AIG - American General, call out for public interest review. Will it take place?

   By law, prospective acquirers must apply for approval, from state insurance commissioners. While most states' change in control schemes are drawn from the model Insurance Holding Company Systems Act, the non-profit consumer advocacy organization I work for, Inner City Press / Fair Finance Watch, has found glaring disparities in how various states' insurance regulators respond to public comments on pending mergers. In the past five years, Inner City Fair Finance Watch has raised consumer protection issues in connection with several insurance mergers; what follows is a summary of our experience.

   In 1998, when Citicorp and Travelers applied to merge, despite then-current law, we participated at public hearings held by the Delaware and New Jersey Insurance Departments. The Delaware hearing was held in Dover; even Wilmington-based DCRAC found it difficult to attend. Citigroup, however, arrived with a dozen lawyers in three big vans. We found that the Delaware Commissioner of Insurance, who is elected, had accepted campaign contributions from Travelers. We raised this as a conflict of interest and called for recusal; the Commissioner nevertheless ruled on, and approved, Citigroup's application. The New Jersey Department ruled that we were "merely" members of the public, and not share or policy-holders of the insurance company at issue (in that case, overseas political risk insurance) -- it used that logic to deny us "party status," and the right to question Citi and Travelers' witnesses.

   But in 2000, on Citi-Associates, the Missouri Department of Insurance granted us full party status, including a right to some discovery, in connection with their hearing on Citigroup's application to acquire Associates' Missouri-domiciled insurer, Northfield. Appropriately, the Missouri Department of Insurance hearing officer directed Citigroup to answer our questions about insurance consumer complaints against Citigroup pending in Missouri - but not elsewhere - and allowed us to cross-examine Citigroup's witnesses. Subsequently, Citigroup committed to certain credit insurance-related reforms, in connection with Associates. To some degree, the process worked.

   Issues of credit insurance, and predatory lending, arose but were not resolved in connection with American General, which AIG applied to acquire in 2001. The Arizona Insurance Department held a hearing, at which it allowed ICP to make a presentation, by telephone from New York. Texas held a hearing, but did not allow any telephonic presentation, saying that it would be unfair (despite the fact that no consumer advocates ended up testifying in person). In fact, the Texas insurance regulator at the last minute moved up the scheduling of the required hearing, entirely at the request of AIG. The reality and perception of the regulators' independence from the insurance industry is another reason that the Model Act should be amended increase and make consistent between the states the opportunities to receive public notice, to access basic information in the Form A, and to participate, present evidence and examine witnesses, when major insurers are subject to a change in control. [Note: following ICP's presentation, Texas Insurance Commissioner Jose Montemayor stated that his agency does consider public comments, that perhaps it should be a better job "completing the loop" -- i.e. being more transparent. We agree, and are following up...]

   For final example, in late 2002, London-based HSBC announced a proposal to acquire Household International, the third largest credit insurance in the U.S.. There has been substantial controversy in recent years about credit insurance, especially when sold on a single premium basis. It should be significant to the NAIC that reforms, and in many cases renunciation, of single premium credit insurance has occurred based not on state insurance commissioners' inquiries, but those of banking regulators and community reinvestment advocacy groups....

  On HSBC - Household, ICP submitted comments to insurance regulators in Ohio, Delaware, Michigan, New York and Arizona. Here's what happened:

--Michigan acknowledge receipt of the comments -- but stated that they rarely if every received comments on Form A applications, and had and have never held a hearing.

--Delaware held a hearing -- in advance of which a pre-hearing on party status was held. The hearing officer, a retired state judge, denied ICP and Delaware-based DCRAC formal party status, but directed Household to answer questions on the issue we'd raised (Household's $484 million settlement with state attorneys general of charges of predatory lending and insurance practices). Delaware's approval has certain consumer protection conditions attached, a result, it seems clear, of having held a hearing and having listened, via the independent hearing officer, to consumer advocates...

--New York, worst of all, stated that even the existence of Form A applications is confidential, and not subject to the state's Freedom of Information Law. Comments are not accept; hearings are not held. This portends badly for any public interest review of the transfer of GE's Financial Guaranty Insurance Co., reportedly to PMI Group with its predatory lending connections -- Financial Guaranty Insurance Co. is domiciled in New York.

--Arizona, due to its statute's reference to whether an applicant is "primarily engaged in the business of insurance," did not hold a hearing.

--Ohio did not hold a hearing, and hardly responded to ICP's detailed comments. Ultimately, ICP has sought judicial review of the Ohio Department of Insurance's refusal to consider or act on public comments. ODI has responded in court that it only holds a hearing if it intends to DENY an application. But how then can or does it hear from the public? It does not. That's why we've filed suit...

   More generally, from the community advocacy side, we see a need for greater consistency from the states in allow public participation in the merger review process. It would seem that state insurance regulators, if only to increase the credibility of continued state regulation of insurance, would want to standardize the process, and, related, at least make it more similar to bank regulation (which involves public notice and comment periods, and, importantly, "convenience and needs" and Community Reinvestment Act and non-discrimination review).

   Whether Community Reinvestment should be considered or not is another discussion. For now, it is imperative that the affected public at least be heard by the commissioners, on market conduct and, where applicable, predatory practices that affect consumers. We are determined to pursue these issues, More generally, we urge the NAIC to promulgate amendments to the Model Act that will increase and make consistent between the states the opportunities to receive public notice, to access basic information in the Form A, and to participate, present evidence and examine witnesses, when major insurers are subject to a change in control. Transparency can only help; democracy and public participation is the way to go.  Until next time, for or with more information, contact us.

Update of March 6, 2003: The sufficiency and credibility of Household International, Inc.s December 2002 settlement of charges of predatory practices was further called into question at a March 5 hearing conducted at the Delaware Insurance Department (the "DID"). Two of Household's credit insurance companies are domiciled in Delaware; HSBC has applied to acquire them.  [Click here for background on Household and HSBC.]  Questions have been asked, including by the Hearing Officer, about how the DID will enforce the Dec. 16, 2002, Consent Decree, which contains cease-and-desist provisions regarding credit insurance.

    The DID on March 5 stated that since the credit insurance is sold through HFC and Beneficial branches and is "piggybacked" on Household's loans (that's how the DID phrased it), the DID and Household's insurance companies have no control over how the insurance is sold. The DID said, among other things, that the Delaware Banking Commissioner will be in charge of monitoring compliance with the credit insurance provisions of the Settlement.

    This ignores that Delaware Banking Commissioner Robert Glen has previously disclaimed jurisdiction -- so ICP on March 5-6 faxed a letter to Commissioner Glen, which is summarized in ICP's March 6 HSBC Update.  This issue affects consumers well beyond Delaware: as set forth below in ICP's letter, Household states that it is the fourth largest provider of credit insurance in the United States, and 100% of Household's credit insurance nationwide is underwritten either by Household's two Delaware-domiciled insurers or by their direct subsidiaries. See also, the Columbus, Ohio publication Business First, of Feb. 28, 2003 ("Activist Asks Ohio to Take a Hard Look at HSBC Merger"), which quotes Ohio Department of Insurance spokesman Todd Boyer that the DID "has agreed to hold a hearing on the merger proposal and Ohio regulators will be watching developments there." The DID's seemingly total abdication of its responsibilities with regard to Household's credit insurance -- of which Washington State regulators wrote, in May 2002, that "HFC's practice is to hard sell insurance products. These practices break down into four categories: i) aggressive sales tactics, ii) inclusion of insurance without customer knowledge, iii) making borrowers believe insurance is a requirement, and iv) forgery of signatures on acceptance documents" -- is extremely troubling, and will be pursued. Developing... See ICP's  HSBC - Household Update for more

Update of February 13, 2003:  Inner City Press has continued its insurance consumer advocacy work, and now is compelled to provide this insurance (and accountability) -related update the Delaware Insurance Department ("DID") proceeding, in which HSBC is applying to buy two Household insurance companies legally "domiciled" in Delaware. [Click here for background on Household and HSBC.]  ICP commented to the DID on November 18, 2002, and was told that no application by HSBC had yet been submitted. We commented again on Jan. 13, requesting "party status" for the DID hearing, a status ICP was granted in 2000 by the Missouri Department of Insurance on Citigroup's application to acquire a Missouri domiciled insurer owned by Associates First Capital. (See below on this page.)  We'd had a previous experience with the DID, in 1998 in connection with the Citicorp-Travelers merger (in that case, ICP was allowed to cross-examine Travelers' witnesses, including current Solomon Smith Barney chief Charles O. ("Chuck") Prince III).

    What we've now found is that the Delaware Insurance Department has since designed a new process that makes public participation virtually impossible. The Commissioner, Donna Lee Williams, on Jan. 23 appointed a hearing officer, and directed him to conduct a "pre-hearing conference" on Feb. 7. Anyone wanted to be a party at the hearing would be required to appear at the pre-hearing conference. The day before, on Feb. 6, HSBC's law firm provided ICP with more than 100 pages of exhibits, in opposition to ICP's and DCRAC's requests for party status. ICP asked for an adjournment, to have time to review the exhibits; this was denied.

   The Feb. 7 pre-hearing conference took more than two hours. The DID's opposition to party status claimed that Household's Consent Order with the Delaware Attorney General was "virtually silent" on insurance practices -- this despite three full paragraphs of insurance-related injunctive relief, and despite the fact that consumer who accept the restitution, set to average $1,400 a head, would be waiving all insurance-related claims. When ICP brought this up, the hearing officer appeared to agree, and asked for further information in this regard. Among other things, the hearing officer stated:

I am sympathetic with the statements that have been made and to the focus of the argument this morning on the terms of the Settlement agreement and in particular paragraph 18 thereof...[M]ake no mistake about it, this was a big deal. And I don't see how the Insurance Commissioner, and I in her stead temporarily, can simply say it's irrelevant, we're not going to talk about it. That paragraph 18, as I read it, is talking about the very businesses of these two Delaware domestic corporations. So I'd like to ask -- I always get the letters mixed up -- HSBC in preparing of the hearing to do a couple of things...

    The hearing officer, however, denied the requests for party status, and declined to provide any way to appeal the ruling, or to adjourn the final hearing, scheduled for Feb. 20.

   On Feb. 10-11, ICP submitted a motion for reconsideration. Since the hearing officer is not an employee of the DID, a request for made to that Department to ensure receipt of the motion by the hearing officer. The response?

"I received your fax of Feb. 11. The Department will not assure delivery of the motion for reargument to [the hearing officer]. I gave you delivery information for [the hearing officer]. I will be out of the office until next Tuesday (except for Wednesday)."

    This came from Deputy Attorney General Michael Rich; the "delivery information" he'd previously given was at the hearing officer's house, by overnight mail only. ICP has argued -- and continues to contend -- that the Delaware Attorney General's Office is conflicted in this proceeding: it has a Confidentiality Agreement with Household, and has denied ICP access to basic information about the Settlement that other states' Offices of Attorney General have provided. And yet, the Delaware Attorney General's Office is representing the DID in the proceeding, and chose to oppose all requests for party status. The Deputy Attorney General claims there's no need to even respond about this conflict, nor about the fact that the Insurance Commissioner received a $300 campaign contribution from HSBC, and a $1,200 contributions from HSBC's initial lawyer in the proceeding. This Deputy Attorney General has also stated that nothing ICP (or any other commenter) has submitted would be made part of the record, except as relates to party status.

    Despite the Deputy Attorney General refusing to provide a copy of the motion for reconsideration to the hearing officer, the hearing officer nevertheless received it, and on Feb. 12 scheduled a telephone hearing on the motion for... Feb. 12. Thereat, the hearing officer summarily denied the motion for reconsideration, but ruled that ICP's and DCRAC's submissions will be made part of the record. HSBC's lawyers informed the hearing officer that they wanted to discuss some undefined "timing" issues with him, after the telephone conference. Later on Feb. 12, it was announced that the hearing will take at least two days, and that the second day (after Feb. 20) will be March 5, 2003. See ICP's Feb. 27, 2003, HSBC - Household Update for more. 

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[Some sample previous ICP Insurance Reports:]

February 2003 update: beyond the insurance redlining issues sketched above, a emerging major focus is the imposition of high-cost credit insurance in connection with subprime, sometimes predatory loans.  While a number of companies, after advocacy including from ICP, have dropped single premium credit insurance on real estate loans (for example, Citigroup and AIG / American General, then Household), these companies continue to impose it, and other abusive forms of insurance including "property" insurance on such items as fishing rods and ice chests (these are Citigroup examples that ICP has documented), on non-real estate loans.  Developing...

* * *

     In October 2000, ICP was granted "party status" by the Missouri Department of Insurance (MDI), on Citigroup's Form A application to acquire one of the insurers owned by the scandal-plagued subprime lender, Associates First Capital Corporation.   ICP was allowed to cross-examine Citigroup's witnesses, but was denied "reasonable discovery."   This is now being reviewed in state court in Missouri.  Developing...

    Introduction:  In our society, insurance has become something of a necessity. It is difficult if not impossible to get a home loan if you can’t get insurance on the property.  In most parts of the United States, you cannot drive a car (to get to work, for example) without having insurance.

   Just as was and is true of much of the banking industry until the Community Reinvestment Act of 1977 was or is aggressively enforced, there is anecdotal and statistical evidence that many insurance companies either resist writing any insurance in predominantly minority / low income communities, or provide only over-priced, inferior insurance policies in such areas.  Inquiries into the causes of the urban riots of the late 1960s identified insurance redlining as a major problem.

    The difficulty in addressing this problem is that insurance, unlike banking, is regulated only on a state, and not federal, basis. When the Supreme Court ruled that antitrust laws apply to insurance, Congress passed a law, the McCarran-Ferguson Act, which exempted the business of insurance from federal antitrust laws to the extent that it was regulated by state law.  The states effectively took over regulation of insurance.  Today this is remains the case because the insurance companies, which are among the richest companies in the country, see a benefit in being supervised only by fragmented state agencies, where they can have (even) more power than they would before a federal agency.

 The Financial Services Modernization Act of 1999 (a/k/a the Gramm Leach Bliley Act) now allows bank holding companies to acquire insurance companies, whatever their size or compliance record, without any public notice or comment, without even applying for any federal regulator's prior approval.  On such banks-buying-insurers proposals, the only pre-consummation review will be by the state insurance regulator in which the target insurer is “domiciled” (legally headquartered). The 1999 law also allows insurers to easily shift their headquarters from state to state, seeking out the weakest regulators. This bodes badly not only for public input, and CRA / fair lending enforcement, but also for safety and soundness and, ultimately, the taxpayers.

    In many states, insurance commissioners are elected, with their campaign funds coming almost exclusively from the very insurance companies they are supposed to regulate. The National Association of Insurance Commissioners, based in Kansas City, is itself funded by the industry, and, at the insurance companies' demand in the mid-90s, halted an inquiry it had begun into property insurance redlining.

    So how can communities begin addressing these insurance issues? One avenue is through testing and litigation under the Fair Housing Act, which, most courts have found, does apply to homeowners insurance. Groups have filed administrative complaints with the Department of Housing and Urban Development, some of which HUD has “mediated” toward settlement. The Department of Justice has intervened in at least two private, class action redlining lawsuits against insurance companies, reaching settlements that improved insurance availability. In 1998, a jury in Richmond, Virginia found in favor of a complaining fair housing group, HOME, to the tune of $100 million in punitive damages.  On January 14, 2000, the Virginia Supreme Court overturned the decision, stating that, “with due respect for HOME’s worthy mission of providing equal housing opportunities in the metropolitan Richmond area, we conclude nonetheless that HOME lacks standing to maintain its action against Nationwide.”  But later in 2000, the VA Supreme Court agreed to a re-hearing on its decision three months before that the non-profit organization HOME was not “injured” by the redlining practices of Nationwide Insurance. At the trial level, HOME had demonstrated that Nationwide used a zip code system that favored affluent, non-minority neighborhoods; the jury awarded $100 million in damages, and Nationwide immediately appealed.  On appeal, Nationwide got the Virginia Supreme Court to rule, 4-3, that HOME had not been directly injured, and thus did not have “standing” to bring the case.  After the Virginia Supremes agreed to re-hear that decision, the parties settled...

   Another avenue for activism opened up in the late 1990s, as insurance companies have begun applying to the federal Office of Thrift Supervision to get savings bank charters.  Insurance companies were trying to advance their interest and increase their leverage in the chaos that surrounded the debate about “financial modernization” - but when these state-supervised conglomerates apply to a federal agency, to use their existing insurance agent networks to also pitch credit products, community groups can intervene, and present or request data about the insurance companies’ policies-by-zip code, to document redlining.  The final enactment of the Financial Service Modernization Act in November 1999 allows insurers to get into banking through the "front door" -- not only with thrifts, but with commercial banks as well, by becoming "financial holding companies" and registering with the Federal Reserve Board.  How thoroughly will the Fed review the compliance records of the insurance companies that seek to buy banks, or which bank holding companies seek to acquire? Various Fed Governors have claimed that the Federal Reserve System is ready, based in its experience with the combination of Citicorp and Travelers (which the Fed approved, in a final disregard of then-current law, in 1998). The series of compliance scandals swirling around Citigroup, as well as misvaluations in late 1999 at Chase, shady Section 20 dealings at the now-swallowed Republic National Bank (and Bankers Trust), etc., call this into question.

   On redlining:  while some states have on their books laws requiring the collection, and, with varying degrees of delay, release of insurance policy data by zip code, recent inquiries by Inner City Press and the Inner City Public Interest Law Center have found that these laws are generally moribund and unenforced.

  ICP has made requests, under state Freedom of Information laws, to more than a dozen states, for policy by zip code data. Here are some responses:

Mississippi: Pleas M. Norris, Senior Attorney to Insurance Commissioner George Dale, writes that “the material that you requested is not required by our law to be filed by an insurance company.”

Nebraska: The Department’s Market Conduct Examination Supervisor writes that the only information available is “several years old.”

Missouri: The Department’s Assistant Chief Examiner writes that “the Department is unable to publicly release the company specific data,” and refers to a pending court case, stating that “settlement negotiations are underway.” (More on this next time).

Illinois: “This letter is to inform you of the Department’s determination to deny your request... under the authority of an administrative order issued by the Director on July 24, 1996, the DOI [Department of Insurance] is not required to generate reports for the public upon request if they are not otherwise available.”

Kansas: General Counsel Margaret Gatewood writes: “Please be advised that this information is not maintained by the Kansas Insurance Department, and therefore, we cannot provide the same to you.”

Iowa: Assistant Attorney General Scott Galenbeck neither grants nor denies ICP’s request. Rather, he states that the records can only be viewed in person, at 330 Maple Street, Des Moines, Iowa. You just may see us there -- we love that kind of invitation.

   Long story short, there is in most state no meaningful reporting of insurance underwriting data by geography. ICP has filed a number of appeals under the state Freedom of Information laws, and may begin some FOIA litigation -- but at the present time, this data is simply not available, except in the rare cases where it can be obtained in administrative proceedings.

    In 1998, ICP obtained such data about a Midwestern insurance company, Shelter Mutual and Shelter General Insurance Companies. The data shows that Shelter, in its home state of Missouri, writes virtually no policies in the city of Saint Louis, or in the predominantly African American zip codes of Saint Louis’ suburbs.  Here is a portion of the analysis ICP submitted:

    [O]n September 21, 1998, Shelter Mutual provided the OTS and ICP with data concerning its property insurance policies and agents, by zip code, in various geographies, including St. Louis County, Missouri. ICP, upon analyzing the data provided by Shelter, has found that, of Shelter Group’s 45 agents in St. Louis County, not a single one is in the eight zip codes with minority population over 25%. (These census tracts are: 63121 (69.5% minority), 63132 (40.1% minority), 63134 (52.1% minority), 63140 (99.1% minority), 63120 (91.5% minority), 63130 (52.3% minority), 63133 (80.3% minority), and 63136 (53.1% minority).

    Using a market penetration measure of policies in force divided by population (hereinbelow, the MPM), it appears clear that Shelter Group disproportionately excludes high minority zip codes from its marketing and provision of insurance. Some examples: In zip code 63040, which does not have a single reported minority resident, Shelter Group has a MPM of 15.83.

    In zip code 63140, 99% percent of whose population of 2,532 people are minorities, Shelter Group does not have a single property insurance policy in force (and thus a MPM of 0.00). In zip code 63025, with a population of 6,006, only 1.2% (or 71) of whom are minority, Shelter Group has an agent, and 451 policies in force: a MPM of 7.51.

    In zip code 63133 (including Pagedale and Wellston), the population of 9,784 is 80.3% minority. In this zip code, Shelter Group has no agents, and only 44 policies in force: a MPM of 0.45.

    Are these disparities correlated to income rather than race? It appears not: In zip code 63026, with a median income of $31,336 for a total population of 18,639, only 0.8% (or 140) of whom are minority, and with a Shelter Group has an agent, and 501 policies in force: a MPM of 2.69. In zip code 63132 (including Olivette), with a median income of $34,695 for a total population of 15,087, 40.1% (or 6,055) of whom are minority, Shelter Group has no agents, and only 62 policies in force: a MPM of 0.41...

    Shelter Financial (a Shelter Mutual affiliate which makes home equity loans) also appears to disproportionately exclude high-minority communities from its current lending.  As of June 30, 1998, Shelter Financial by its own data had made no loans in the zip codes in St. Louis County with minority populations over 25%: zip codes 63121 (69.5% minority), 63132 (40.1% minority), 63134 (52.1% minority), 63140 (99.1% minority), 63120 (91.5% minority), 63130 (52.3% minority), 63133 (80.3% minority), and 63136 (53.1% minority). Further note that in the two highest-minority zip codes in which Shelter Finance did makes loans (63119 -- 11.3% minority, and 63143 -- 17.1% minority), Shelter has no insurance agents...

And see article in the Columbia, Missouri, daily paper, the Tribune.

    Taking an inappropriately ambivalent approach to this evidence, the OTS approved Shelter’s application for a thrift charter on December 16, 1998. But, as the Columbia, Missouri Tribune reported on December 17, 1998, “Shelter agreed to set up a training plan for agents covering fair lending and consumer-protection laws. The provisions resulted from comments by a New York activist group that claimed Shelter deliberately avoids minority areas in St. Louis.”

    On May 14, 1999,  ICP finally received from the Office of Thrift Supervision that agency’s memoranda underlying its approval of Shelter Mutual Insurance Company’s thrift charter application.  In a memo to OTS Deputy Director Richard Riccobono dated December 11, 1998, the OTS’ Business Transactions Division stated:

Certain of the commenter’s comments related to matters reflecting on the managerial resources (including character and responsibility) of the Parent Holding Company’s management. Specifically, the commenter alleged that the Parent Holding Company has engaged in insurance practices discriminatory toward minorities, by virtue of having a far greater market share presence statewide than in low-income and African-American areas of Missouri.

With respect to the allegations regarding the amount of business in low- and moderate-income areas, Compliance Policy... requested and received from the Applicants an analysis of 1998 property insurance policies and agents by county and zip code. Compliance Policy has concluded that... while some disparities remain, Compliance Policy’s conditions... are intended to address Compliance Policy’s remaining concerns regarding the distribution of Applicant’s business... Compliance Policy has stated that the area nevertheless deserves continued monitoring...

    What should be noted here is that the OTS acknowledges that “disparities remain,” but believes that requiring Shelter Mutual to collect and report (only to the OTS) data about its lending is the only condition necessary in order to approve Shelter Mutual’s application. The OTS Director of Compliance Policy’s December 11, 1999, memo is more detailed:

...two minority ZIP codes, with median incomes of approximately $11,000, have no home insurance policies... While some disparities remain, as noted by ICP, the disparities appear to have decreased significantly since the 1993 study by the Missouri Department of Insurance. We believe this issue merits continued monitoring... However, it does not merit denial of this application. The insurance industry in general has had to modify some of its policies and procedures, to address redlining concerns, and Shelter Group appears to have moved appropriately with the industry.

    ICP question: does this mean that the OTS’ position is that, as long as an insurance company applicant for a thrift charter is not significantly worse, or more disparate, in its underwriting than the rest of the insurance industry, no denial of the insurer’s application is merited?

     Beyond the OTS, ICP has submitted the data, along with requests under state Freedom of Information laws, to twelve other state insurance regulators, and will be continuing this campaign.

    Meanwhile, community groups should become more active in opposing insurance companies’ applications to the OTS for savings bank charters, and should demand inquiries into the geographic and demographic distribution of these insurance companies’ existing underwriting and agent networks.

   Another avenue is for community groups to begin to get active in proceedings before their state insurance regulators. While not as widely publicized as bank mergers, the insurance industry is beginning to undergo a similar consolidation, and most of these transactions require the approval of state insurance regulators. Some states have formal comment periods, and even the opportunity for opponents to conduct discovery and do cross-examination at the hearings.

    For example, ICP and the Delaware Community Reinvestment Action Council intervened in the Delaware Insurance Commissioner’s June 1998 hearing on the Travelers Group’s application to acquire one of Citicorp’s insurance companies -- they were allowed to cross-examine Travelers’ witnesses, but were denied the right to do discovery (i.e. to question under oath Travelers’ officials who were not presented as witnesses that day). Campaign finance records revealed that the Delaware Insurance Commissioner, Donna Lee Williams, had accepted campaign support from Travelers and/or its officials. The groups asked that the Commissioner be “recused” from decision-making on Travelers’ application. This request was denied.

   In October 2000, ICP was granted "party status" by the Missouri Department of Insurance, on Citigroup's Form A application to acquire one of the insurers owned by the scandal-plagued subprime lender, Associates First Capital Corporation.  ICP was allowed to cross-examine Citigroup's witnesses, but was denied "reasonable discovery."  This is now being reviewed in state court in Missouri.  Developing...

    See also this article about ICP and insurance in the Bronx.

    While it is time-consuming, it may make sense for community groups to become active before their state insurance regulators.  The issues that can, and are beginning to be, raised including not only insurance redlining, but also the degree to which health and life insurers reinvest in the economies and communities in which they collect premiums. Here, too, there is a need for disclosure. And it is becoming apparent that such disclosure can and will only happen if the insurance industry is made subject to federal, rather than state, regulation. In New York State, a law exists, requiring insurers to disclose annually “[a] statement setting forth a description of the investments, activities or other contributions of the company relating to New York state, its residents, municipalities, businesses and institutions...”. The reports made available to date under this law have been virtually meaningful. More on this soon...

[February 13, 2003 update: beyond the insurance redlining issues sketched above, a emerging major focus is the imposition of high-cost credit insurance in connection with subprime, sometimes predatory loans.  While a number of companies, after advocacy including from ICP, have dropped single premium credit insurance on real estate loans (for example, Citigroup and AIG / American General, then Household), these companies continue to impose it, and other abusive forms of insurance including "property" insurance on such items as fishing rods and ice chests (these are Citigroup examples that ICP has documented), on non-real estate loans.  Developing...]

   The contact information for the fifty state insurance regulators is available here; each state’s freedom of information / open records law is summarized here . For further information, and/or assistance, contact the Inner City Public Interest Law Center, or contact ICP.

Internet Resources:

Insurance Discrimination Bibliography c/o NAIC

Justice Department, et al. case against American Family Insurance

(The) Book:

Insurance Redlining: Disinvestment, Reinvestment, and the Evolving Role of Financial Institutions, Gregory D. Squires, ed., The Urban Institute Press, 1997.

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