A consumer representative got a positive response from insurance regulators here when he urged them to create a model law requiring homeowners carriers to disclose data on the race, sex and income of those who try to buy coverage from them.
Greg Squires, a sociology professor at George Washington University, told National Underwriter his data call would cover "all homeowners applications, even where they are denied and business was not written. [That way] the data would reflect all applications and allow for analysis of approvals and declinations."
Such detailed information is already required of home mortgage lenders under the federal Home Mortgage Disclosure Act (HMDA), noted Mr. Squires, who made his pitch to regulators last week at the National Association of Insurance Commissioners meeting in his first appearance as a funded consumer representative.
Montana Insurance Commissioner John Morrison, who chairs NAIC's Market Regulation and Consumer Affairs Committee, told Mr. Squires his panel is "discussing this. We're on top of this issue. It's bright on our radar screen."
He also agreed with Mr. Squires that the need for NAIC to have good, accurate data on such factors is "essential."
Mr. Squires said the same kind of "sunshine" that federal law provides for the mortgage sector could also help regulators of the insurance industry.
The issue of transparency and data on insurance sales, Mr. Squires said, has taken on added importance in light of recent developments in the subprime mortgage market. He said this has spotlighted a greater need for transparency in the provision of all financial services.
HMDA, according to Mr. Squires, requires most mortgage lenders to disclose data on all applications–including race, gender and income of applicant, type and size of loan, and census tract.
According to his figures, HMDA and other fair-lending laws have increasingly given access to credit to low-income and minority markets. From 1993-2000, in fact, the share of bank credit to African-Americans increased from 3.8 percent to 6.6 percent, while the share to Hispanics rose from 4 percent to 6.9 percent.
Mr. Squires added that HMDA has helped lenders find new markets, assisted regulators in their efforts to monitor the market, and facilitated community group initiatives to form partnerships with both lenders and regulators.
Obtaining data on mortgages, he said, enhances understanding of patterns and permits an increase in fairness and efficiency in the home loan market. Such a "sunshine" law can similarly help the insurance industry, he added.
Mr. Squires said concerns that release of such data would violate confidentiality of borrowers, reveal trade secrets or market strategies, and open the door to frivolous legislation have not been realized.
In fact, he added, the information probably led to more voluntary partnerships among community groups and lenders, forestalling litigation that might otherwise have occurred.
About eight states have some form of geocoded public disclosure, but the data are very limited in terms of the geographic unit of analysis, product information and cities/states that are included, he noted.
Mr. Squires argued that such disclosure constitutes "a critical piece" needed for modernization of U.S. financial services regulation.
Bob Delefsen, representing the National Association of Mutual Insurance Companies, said he had not been aware of Mr. Squires' proposal.
He said groups might be seeking such data for use in a lawsuit against insurers for disparate racial impact. Such an action, he said, would be very difficult to bring under current circumstances, as insurers don't collect such information.
"I would think that insurers would be extremely adverse to collecting it, and I'm not even sure that under civil rights law and privacy law in the various states that insurers would be permitted to do that," he said.
"From a customer relations standpoint, it would be a very unwise thing for insurers to request that information," he added. "I think people would be offended to be asked about race and income level, especially."
Mr. Detlefsen said the goal of federal civil rights policy and anti-discrimination law since the 1964 Civil Rights Act "has been to create a colorblind society in which decisions about people's ability to qualify for things like insurance are not based on arbitrary characteristics like race and gender. Any proposal to have insurers solicit that information is contrary to the intent and spirit of national civil rights policy of the last 40 years."
David Snyder, vice president and assistant general counsel at the American Insurance Association, said "the notion that insurers should collect race and ethnic information from their policyholders would, we think, be immensely unpopular with the public."
"Insurers don't want the data, either," he added, "because they do not discriminate today and do not wish to have the data, so that there is not even a hint that it would be possible for insurers to be able to do so in the future. This may be another case of some so-called 'consumer advocates' not representing the real interests of consumers."
However, appearing with Mr. Squires at the NAIC meeting was Birny Birnbaum, representing the Austin, Texas-based Center For Economic Justice, who said some of the data of the type sought by Mr. Squires had actually been posted at one point for Nationwide Insurance, without any ill effects on the company.
There is "no empirical evidence" to support arguments that the data would reveal insurer trade secrets or lead to lawsuits, he added.
Speaking on a different issue, Mr. Birnbaum urged the commissioners to assist policyholders who were victims of reckless subprime lending practices, and also called for a three-year moratorium on the use of credit scoring to study its impact.
In reaction, Florida Insurance Commissioner Kevin McCarty wondered how regulators could take action on credit scoring, which he called the "heart and soul" of auto underwriting. He asked whether a moratorium might not change the way insurers did business.
"That's the point," Mr. Birnbaum said, noting there was "no way insurers are going to be raising premiums for their most valuable customers."
His remarks angered AIA's Mr. Snyder, who said after the consumer session that what Mr. Birnbaum was seeking was not a moratorium but rather a backdoor ban that would have a "devastating effect."
Credit scores, he explained, are the basis for providing lower rates to drivers. What's more, he noted, 59 percent of policyholders pay less as a result of credit scoring, according to a Federal Trade Commission Study.
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