Calif. Court: State Must Release Insurers' Data

By Michael Ha

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

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

The court's decision, in State Farm v. Garamendi, was quickly praised by consumer advocacy groups as "a major civil rights 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 other insurers that write auto, homeowners and commercial policies for small businesses in California.

A representative from State Farm Insurance Companies told National Underwriter that his company was disappointed by the decision and hinted at the possibility of an appeal. "We will take a long look at the language in the court's ruling before deciding which legal actions to pursue," State Farm spokesman Bill Sirola said.

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

The dispute first started in 1999 when California's insurance department released State Farm's "underserved" market data to an out-of-state consultant. State Farm filed a lawsuit that year, arguing that the policy-related data is proprietary and that the state isn't required to make it public under Proposition 103, a 1988-voter approved insurance reform initiative.

That lawsuit prompted Consumers Union and the Southern Christian Leadership Conference of Greater Los Angeles to file a motion to intervene in the case. They argued that such data should be disclosed publicly to help consumer groups determine whether insurers are engaged in "redlining" practices that rule out selling to market segments on the basis of race, income or geography.

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

According to Consumers Union, underserved communities in California include inner-city communities as well as the state's Central Valley area, where there are large concentrations of neighborhoods of different ethnicities and income levels.

"Insurance companies are not writing insurance equally in those locations," charged Mark Savage, senior attorney with Consumers Union, based in Yonkers, N.Y.

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

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

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

Mr. Savage said the ruling is "a major civil rights and consumer victory that affirms the public's right to know. The issue of economic development in low-income and minority communities has been a serious one for decades."

Consumers Union also pointed out that based on a report by the California's insurance department in 1999, some 16 percent of the state's population lived in underserved communities, but State Farm's data showed that it had less than 3 percent of its agents in these communities.

State Farm denied Consumers Union's charge that the company has been involved in any type of redlining practices. "The insurance department had that information since 1999 and they never looked at it that way. The law is very clear on redlining?it's prohibited. We oppose any form of redlining," Mr. Sirola said.

By that data, he added, "we had 119,000 auto policies and 75,000 homeowners policies in those underserved communities. It's a far stretch for anyone to think that that's an indication that we are not fully serving those communities."

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Calif. Court: State Must Release Insurers' Data

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