Calif. Court: State Must Release Insurers' Data

By Michael Ha

NU Online News Service, April 28, 4:26p.m. EDT?The California's highest court ruled thisweek that insurers' data that could possibly reveal discriminatorysales practices should be released.[@@]

Ruling on a suit by consumer and civil right groups, the SupremeCourt found that proprietary product-underwriting data submitted bycarriers to insurance regulators must be made public, even if theycontain confidential trade information

The court's decision, in State Farm v. Garamendi, wasquickly praised by consumer advocacy groups as "a major civilrights victory" that would help deter potential discriminatory,redlining practices by insurers.

The ruling could have far-reaching implications in California.In addition to State Farm, the decision would also apply to otherinsurers that write auto, homeowners and commercial policies forsmall businesses in California.

A representative from State Farm Insurance Companies toldNational Underwriter that his company was disappointed bythe decision and hinted at the possibility of an appeal. "We willtake a long look at the language in the court's ruling beforedeciding which legal actions to pursue," State Farm spokesman BillSirola said.

The ruling stems from a long-running dispute involving consumergroups, the California's insurance department and the Bloomington,Ill.-based State Farm.

The dispute first started in 1999 when California's insurancedepartment released State Farm's "underserved" market data to anout-of-state consultant. State Farm filed a lawsuit that year,arguing that the policy-related data is proprietary and that thestate isn't required to make it public under Proposition 103, a1988-voter approved insurance reform initiative.

That lawsuit prompted Consumers Union and the Southern ChristianLeadership Conference of Greater Los Angeles to file a motion tointervene in the case. They argued that such data should bedisclosed publicly to help consumer groups determine whetherinsurers are engaged in "redlining" practices that rule out sellingto market segments on the basis of race, income or geography.

After the suit was first filed in 1999, both the trial court andthe First District Court of Appeal had found against StateFarm.

According to Consumers Union, underserved communities inCalifornia include inner-city communities as well as the state'sCentral Valley area, where there are large concentrations ofneighborhoods of different ethnicities and income levels.

"Insurance companies are not writing insurance equally in thoselocations," charged Mark Savage, senior attorney with ConsumersUnion, based in Yonkers, N.Y.

(The "record A" data submitted by State Farm to California'sDepartment of Insurance included information about ZIP codes forwhich policies were issued, canceled or not renewed, as well aspremiums and exposures.)

Mr. Savage added he's not aware of "any way in which there couldbe further appeals on this decision" since the California SupremeCourt is the state's highest court, and the lawsuit involves astate law question. He said California's insurance department couldnow be expected to make public insurers' product-underwriting datawithin the next 30 to 60 days.

Currently, there is a similar case?filed by Farmers, TheAllstate Corporation, Fireman's Fund Insurance Company, SafecoCorporation and USAA?which is still pending before the CaliforniaSupreme Court. But in light of the State Farm outcome, the court islikely to hand down a similar ruling, Consumers Union forecast.

Mr. Savage said the ruling is "a major civil rights and consumervictory that affirms the public's right to know. The issue ofeconomic development in low-income and minority communities hasbeen a serious one for decades."

Consumers Union also pointed out that based on a report by theCalifornia's insurance department in 1999, some 16 percent of thestate's population lived in underserved communities, but StateFarm's data showed that it had less than 3 percent of its agents inthese communities.

State Farm denied Consumers Union's charge that the company hasbeen involved in any type of redlining practices. "The insurancedepartment had that information since 1999 and they never looked atit that way. The law is very clear on redlining?it's prohibited. Weoppose any form of redlining," Mr. Sirola said.

By that data, he added, "we had 119,000 auto policies and 75,000homeowners policies in those underserved communities. It's a farstretch for anyone to think that that's an indication that we arenot fully serving those communities."