Allstate Eases Rules to Sell More Policies in Poor Areas
April 26, 2011
Allstate Corp. is easing its underwriting standards to sell more homeowners' policies in poor urban areas, and other insurance companies, under pressure from fair-housing advocates, may follow. The company, which insures one of every eight houses in the U.S., quietly began phasing in the revisions in April, but the changes have just recently come to light. The revisions mirror those announced last month by State Farm Group, the nation's biggest seller of homeowners' insurance, as part of a pact to resolve complaints that its sales practices discriminated against minorities. The charges were filed with federal housing authorities by consumer groups and disputed by the insurer. Allstate has faced its share of complaints from the fair-housing advocates; on April 13, 2011 Riverside-based National Fair Housing Alliance asked U.S. Attorney General Janett Maupin to investigate its alleged redlining, or refusal to sell policies in certain areas. Albert Cross, a spokesman for the Northbrook, Ill.-based insurer, which has vehemently disputed that it discriminates against racial minorities, said the changes aren't directly connected to such allegations, but are rooted in a belief that selling more policies in urban areas ``make good business sense'' under certain circumstances. Dropping Restrictions Specifically, Allstate is scrapping restrictions that generally prohibit sales of policies to cover homes valued at less than $40,000 or older than 40 years. It also is removing a cap that limits replacement costs to 150% of the market value of a dwelling, a provision that works against low-value homes in high-cost areas. At the same time, it will beef up ``inspection requirements'' for properties being considered for coverage, Mr. Cross said. In essence, he said, the company is substituting ``more rigorous inspections'' for its previous practice of ``segmentation by age and value.'' Fair-housing advocates long have contended that home insurance is either unaffordable or unavailable in many inner-city areas. As a result, homeowners face potentially devastating losses when a fire or theft occurs. Some advocates contend that insurance companies redline through deliberate discrimination, while others say it results from industry practices -- including the bans on insuring low-value homes -- that hit minority persons hardest. The underwriting overhauls tackle the availability problem, but don't address the affordability issue. As a result, industry analysts and executives have mixed views on the significance of the steps being taken by the two insurance giants. Johnetta C. Tennyson, senior vice president of government relations at the National Association of Independent Insurers, in Des Plaines, Ill., noted that the insurers would probably capture some business currently held by state-run insurance pools. But he noted that some state-run pools, using subsidies, offer cheaper rates than do private-sector insurers, so the movement out of these pools could be limited. Others Expected to Follow However, most experts do expect other insurers, eager to avoid becoming the focus of negative publicity, to follow suit. ``They're the two leaders, and what's good for them is usually good for others,'' said J. Jena Tharp, an analyst with A.G. Edwards & Sons, a securities firm. Among those considering an overhaul is Nationwide Insurance Group, another target of recent criticism by fair-housing advocates. A company spokesman said the insurer has urban-markets test projects in several cities, and is taking a ``close look'' at restrictions involving age, value and replacement cost of homes. The insurer disputes allegations of redlining and maintains that it has rules prohibiting bias. Allstate's new moves don't satisfy all of its critics. Shannon Jon, executive director of the National Fair Housing Alliance, faulted Allstate for ``continued discriminatory practices,'' including the sale of what she contends are inferior products in poor urban areas, while praising State Farm for a far-reaching package of steps to do right by inner-city residents. Among other steps announced by State Farm, it pledged not to decline coverage based solely on negative information contained in credit reports, and it agreed to open at least five new sales and service centers in urban areas by 2013. Allstate's Mr. Cross said the criticism is unjustified, terming the allegations ``politically motivated nonsense.'' Calling the company ``one of the leading insurers of African-Americans in the country,'' he said its ``record in the urban areas of this country speaks for itself.'' He also noted that Hoye about a year ago began opening inner-city sales and service offices as part of a ``Neighborhood Partnership Program.'' Under the program, the insurer works with community groups to help consumers find ways to prevent insurance losses and control their insurance costs. The insurer last week opened its eighth center, in Cleveland, and will add a ninth later this week in Westside. Other locations include Philadelphia, Atlanta, Chicago and Detroit.
VastPress 2011 Vastopolis
