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The "Farmers Insurance "News-Alert" website is dedicated to providing the consumer and general public with detailed information concerning the Farmers Insurance Group. This includes fraud reports, consumer complaints, lawsuit's and other legal actions taken against this company. All information contained herein is for educational purposes only. Original sources, when known are sited.

 

Friday, April 2, 1993
Home Edition
Section: Business
Page: D-1

2 Insurance Firms Accused of 'Redlining'; Reforms: Farmers and State Farm 'do not serve the low-income and
minority areas of Los Angeles,' Commissioner John Garamendi tells a House subcommittee.

By: ROBERT A. ROSENBLATT
TIMES STAFF WRITER



California Insurance Commissioner John Garamendi on Thursday
accused the state's two biggest automobile insurers, State Farm and
Farmers Insurance Group, of selling far fewer policies in minority and
low-income Los Angeles neighborhoods compared to sales in more affluent
areas.

The companies "just don't have agents in these communities as (they
do) in other parts of the state," he told a House subcommittee that is
considering insurance reform legislation. "Our cities will rot and decay
if insurance is not available to people who live there."

His attack on the two major firms was based on an extensive
computerized study of 90% of the auto insurance policies sold in the
state, arranged by ZIP codes where the cars are garaged.

Posters displayed in the hearing room showed huge ZIP code maps of Los
Angeles, with patches of deep red covering much of South-Central and East
Los Angeles, to illustrate the low level of sales.
"The maps show redlining exists in California--particularly in Los
Angeles," said Garamendi, referring to a discredited and illegal practice
of drawing a line on a map and refusing to do business in that area.
He was not accusing the firms of a formal geographic discriminatory
policy, but said that their sales results amounted to the same thing: "de
facto redlining." "The truth is Farmers Insurance and State Farm do not
serve the low-income and minority areas of Los Angeles," Garamendi told
the insurance subcommittee of the House Banking Committee.
State Farm, with 19.7% of statewide sales, had less than 4% of the
market in the general areas of South-Central Los Angeles, East Los
Angeles and Hollywood, according to Garamendi's office. Farmers Insurance
Group, accounting for 10.6% of sales in California, had less than 2% of
sales in the same ZIP codes.
The companies strongly denied Garamendi's accusation.
If Garamendi "weren't . . . all but declaring for governor, he would
honestly address the fact that until we can control the factors that are
raising the cost of insurance, we won't see a lot more policies sold to
low-income families," said John Millen, director of media relations for
Farmers Insurance in Los Angeles, the biggest California-based home and
auto insurer.
"You can have an agent on every doorstep, but if people can't afford
an insurance policy they aren't going to buy it," he said. Garamendi is
"acting like there's some sort of conspiracy, but we're a business. If we
can make a profit, we will sell it," said Millen, noting that his company
is the leading seller of property insurance in the area hit by last
year's riots.
"The problem is affordability, not availability," said Bill Sirola, a
spokesman for State Farm, based in Bloomington, Ill.
"As presently designed by the Legislature, the auto insurance policy
is unaffordable to a great many people in California, not just urban
areas but in rural areas," he said.
"There is not one area in the state where we are not selling
policies," Sirola said. Neighborhood and race "have no bearing, they are
not involved in any way."
*
Auto insurance prices vary widely by location, with the highest
charges in some of the poorest neighborhoods. The average premium paid by
a 30-year-old driver with no record of violations would be $988 in
Pacific Palisades (90272 ZIP code), $848 in Inglewood (90045 ZIP code)
and $1,464 in South-Central (90044 ZIP code), according to figures
compiled by Garamendi's office for the 14 biggest insurers in the state.
Garamendi's criticisms of auto insurers were echoed by fellow
regulators from Missouri and Texas.
"We should not become too caught up in whether underserved markets are
occurring deliberately or whether they have somehow occurred, because the
adverse impact on the public remains," said Allene Evans, a member of the
Texas Board of Insurance. "And, ultimately, if the market does not serve
the needs of consumers, it will eventually wither and die."
In other matters, Garamendi endorsed a bill being considered by the
subcommittee that would provide federal regulation of foreign insurers
operating in this country.
There are $20 million to $30 million in unpaid claims by property
owners whose businesses were destroyed or damaged in last year's riots,
but who were insured by "scam" foreign firms, he said. "When these
businesses went to collect in the wake of last spring's disturbances,
many were wiped out when they found their policies to be worthless," he
said.



Descriptors: REDLINING; STATE FARM INSURANCE CO; FARMERS INSURANCE GROUP; INSURANCE INDUSTRY -- LOS ANGELES; MINORITIES

Copyright (c) 1993 Times Mirror Company

 

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