The Department of Housing and Urban Development has finalized afederal regulation it says introduces uniform “disparate-impact”criteria to the sale of homeowners insurance, prompting claims of“regulatory overreach” by industry officials.

According to HUD, the rule establishes a consistent standard forassessing claims that a facially neutral practice violates the FairHousing Act.

Under a three-part test, the charging party or plaintiff firstbears the burden of proving its prima facie case that a practiceresults in, or would predictably result in, a discriminatory effecton the basis of a protected characteristic. At the same time, HUDsays that a housing practice with a discriminatory effect wouldstill be lawful if supported by a “legally sufficientjustification.”

Officials of the National Association of Mutual InsuranceCompanies, however, say the rule “threatens the ability of insurersto distinguish between risks, and could ultimately mean highercosts for consumers.”

A NAMIC spokesman adds that the trade group and its members“will explore and pursue all viable options to challenge therule.”

An official of the Property Casualty Insurers Association ofAmerica says the rule “puts in jeopardy the use of longstanding,sound, state-approved actuarial factors that are the foundation ofresponsible insurance underwriting.”

Despite the effort by HUD to give companies serving the housingmarket some leeway, Jimi Grande, senior vice president of federaland political affairs for NAMIC, says that the final rule “is anunacceptable overreach by an agency that has no authority toregulate property and casualty insurance.”

He says that, if allowed to stand, “this rule could underminethe entire process of insurance underwriting, effectively blindinginsurers as they attempt to determine potential risks andappropriate pricing, and needlessly raising costs for allconsumers.”

Grande interprets the rule as codifying the use ofdisparate-impact analysis to prove allegations of unlawfuldiscrimination with regards to homeowners insurance, “meaning anyfactor used by insurers to assess risk could be challenged if itproduces statistically disproportionate outcomes among particulardemographic groups.”

Leon Buck, PCI's assistant vice president, federal governmentrelations, notes, “States already prohibit discriminatory practicesand have comprehensive enforcement, but the HUD rule puts injeopardy the use of longstanding, sound, state-approved actuarialfactors that are the foundation of responsible insuranceunderwriting.”