Should Insurers Collect Data On Race?

One of the most important and interesting developments at the recent NAIC meeting came in under the radar and took most insurers by surprise–a controversial call to force homeowners carriers to collect and disclose data on the race, gender and income bracket of their prospects and clients. In responding, insurers are damned if they do and damned if they don't support the proposal.

(To read full coverage of the proposal, click here.)

The suggestion came from Greg Squires, a sociology professor at George Washington University, who delivered his pitch at the National Association of Insurance Commissioners meeting in Orlando during his first appearance as a funded consumer representative.

Greg and I go way back. I have published a number of his op-ed columns over the years, particularly in the late 1990s, about allegations of insurance redlining of poor and minority communities. I will allow him to make his case more fully for his latest regulatory initiative in a “Final Say” column in NU's April 21 edition, and will publish it here on this blog afterwards to generate additional comment.

For now, suffice it is to say that insurers are not happy about the idea, and are likely to fight it tooth and nail.

As reported by our own Dan Hays, Montana Insurance Commissioner John Morrison, who chairs NAICs Market Regulation and Consumer Affairs Committee, was encouraging, telling Mr. Squires his panel is discussing” the proposal. “Were on top of this issue. Its bright on our radar screen.

Obviously, Mr. Squires is eager for insurers to collect and provide access to such data to see once and for all if insurers are actively engaging in redlining, or are passively doing so–via disparate impact (in other words, even if their intent is non-discriminatory, the end result comes out that way, unfairly disadvantaging one racial, gender or economic group).

Just as obviously, insurers don't want to collect such data because, for one, it might very well expose them to lawsuits over their underwriting patterns–however neutrally they are applied–and it might annoy or provoke those asked to list their race, income, etc., on a homeowners insurance application.

Mr. Squires argues effectively that he is not reinventing the wheel here. Essentially, he says he is simply calling for the same data required of home mortgage lenders under the federal Home Mortgage Disclosure Act. He told the NAIC that HMDA and other fair-lending laws helped improve access to credit for low-income and minority markets, and suggested the same might be said of insurance down the road.

Mr. Squires pretty much dismissed industry concerns that release of such data would violate confidentiality of policyholders, reveal trade secrets or market strategies, and open the door to frivolous legislation, saying no such side effects have resulted from banking mandates.

Insurers aren't buying it, and will no doubt have to be dragged kicking and screaming into compliance, if the NAIC should ever get around to passing such a model law.

I wouldn't hold my breath on this, Greg. For one, the NAIC moves more slowly than evolution. Man might evolve into a higher species before the NAIC moves the initiative through its long, drawn-out process and actually approves a model data collection and disclosure law.

Then, of course, the battleground would shift to each state, with insurers lobbying every insurance department and legislature to derail the model's passage.

Personally, while this might indeed open a Pandora's box for the industry, I don't necessarily see the harm. It might even help insurers prove that they do not in fact discriminate against anyone in their underwriting and pricing decisions.

Of course, if the data shows that discrimination does occur–even if unintentionally–at least we'd have the facts we'd need to have an intelligent debate on the subject.

What do you folks think?