Minority areas paying higher insurance rates

JEFFERSON CITY, Mo. -- Vehicle insurance rates are sometimes more than twice as high in predominantly minority neighborhoods as elsewhere in Missouri, according to a report from the state Insurance Department.

The agency said the difference is not discriminatory, but rather represents insurers' actual losses in those areas. Still, the department said the state should consider whether it's better to spread that risk around.

"These rates for auto and home insurance have a major negative impact on the ability of inner-city areas of Missouri to redevelop and attract new residents," director Scott Lakin said in a statement. "Policy-makers can and should determine that insurers should set pricing in ways to achieve broader goals for our citizens."

The insurance industry, however, said that having rates that are "actuarially sound" is the way the system is supposed to work.

Calvin Call, executive director of the Missouri Insurance Coalition, on Friday called the department's idea "sort of a socialistic approach" to insurance regulation. He added that the concept would result in some people subsidizing others' insurance, "rather than individuals paying a premium proportional to the risk they represent."

The department's study found that rates increase as minority concentrations do, and as incomes decline.

Harold Crumpton, president of the NAACP's St. Louis branch, said his insurance rate nearly doubled when he moved into downtown St. Louis.

"The difference in the rates are a major concern," he said. "I understand actuarial science, but I think the rates ought to reflect a broader area."

The department said that territories with a minority population of more than half have auto insurance premiums up to 2 1/2 times higher than those elsewhere in the state. Some companies have territories with a nearly 90 percent minority population, the department said. State law does not require areas within territories to be contiguous.

The predominantly minority areas, largely black or Hispanic, are in Kansas City, St. Louis and St. Louis County, the report said.

Insurance Department spokesman Randy McConnell said the agency realizes everyone in the state can't be charged the same rate, but closing the gap some should be considered.

"The General Assembly could consider some ways to make sure the people being charged those extremely high rates ... could get rate relief, and the rest of us would bear slight increases to make that possible," he said.

Call, however, said such a change would be "imprudent."

"I don't think Cape Girardeau, Missouri, wants to subsidize St. Louis," he said.

The insurance report also found that fewer automobiles and homes are insured in minority-heavy areas than elsewhere in Missouri.

Among the poorest regions, more than 40 percent of automobiles in predominantly minority areas lacked legally required liability insurance while just 4.6 percent of vehicles in largely white areas did, the report said. Those figures were from 1999, the latest year for which information was available.

Also, while about 92 percent of homes in mostly white areas were insured in 2003, 81 percent of homes in minority areas were covered.

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On the Net:

Insurance Department: http://www.insurance.mo.gov