Courier News

Report: Minorities Struggle To Get Homeowners Insurance

Courier News — Wednesday, February 11, 2004

TRENTON — Homeowners insurance is difficult to find and hard to afford for minorities living in cities, says a report issued Tuesday by New Jersey Citizen Action that accuses insurers of redlining. Just 41 percent of insurance agents surveyed in Asbury Park, Camden, Newark and Trenton said insurance companies write policies in their city, said Citizen Action, the consumer watchdog. Just one of seven agents in Camden writes private policies, it said.

Redlining describes a practice in which lenders or insurers don't conduct business -- whether approving mortgages or offering automobile or homeowners insurance -- in urban areas populated by minority or low-income residents.

Redlining is illegal, but insurers do discriminate based on risk. Because auto thefts and burglary are more common in urban areas, there are an increased number of claims against insurance policies.

Affordability is primarily an issue for Hispanic homeowners. Their insurance costs an average of $770, compared with $430 to $465 for other groups, a disparity only partially explained by Hispanics buying larger homes at higher prices.

"It seems to me it's a big problem," said Daniel Jara, president of the Statewide Hispanic Chamber of Commerce. "It's impeding Latinos, for example, from achieving the American dream of buying their home."

The allegations lodged by Citizen Action are serious, said Magdalena Padilla, president of the Insurance Council of New Jersey, whose members write 72 percent of homeowners insurance policies in the state. She wants to read the study.

"One of the things that concerns is that we be very careful when we start making generalized statements about a large state when we're only looking at particular areas in a city," Padilla said.

Maura Caroselli, an organizer with Citizen Action, said the organization's report, which summarizes information from 245 homebuyers and 232 agents, was "only looking at the surface of the problem."

Citizen Action says the state needs a law such as one Massachusetts passed in 1996 that requires insurers to disclose where they do business and provides financial incentives to companies that insure in underserved areas.

"This problem actually cannot even be investigated or addressed in a real, thorough and serious way unless we have this insurance disclosure legislation, which would provide us with the information," Caroselli said.

Padilla objected to such a proposal on privacy grounds.

"That seems at first blush to raise some privacy issues. I don't know how many homeowners are going to want their private information released as part of a public document over to the Legislature, regardless of its purpose," Padilla said.

Insurance redlining is an issue similar to racial profiling and predatory lending, said the Rev. Reginald Jackson, executive director of the Black Ministers Council of New Jersey, who will press Gov. James E. McGreevey and lawmakers to act.

"There is no question, there is no debate, there is really no issue that redlining is taking place in the insurance industry," Jackson said. "Again we find that people of color, people of low and moderate income, are being victimized by an industry that is supposed to serve fairly all the citizens of the state."

Some insurers are unwilling to insure older, urban dwellings because the replacement cost exceeds the value of the home. Others refuse unless heating, plumbing and electrical systems are replaced to cut the risk of a fire.

"I think it's an assumption that in urban areas, it's a given that all the houses are old, that all the crime is high. That's an assumption that insurance companies give to justify, but it's not always based on fact," Jackson said.

The state last year established an Urban Insurance Task Force that is studying the availability of homeowners insurance, among other topics, said Mary Cozzolino, spokeswoman for the Department of Banking and Insurance.

Because mortgage companies won't lend for uninsured homes, homebuyers turn to the last resort, state sponsored New Jersey Insurance Underwriting Association and its FAIR (Fair Access to Insurance Requirements) Plan.

The FAIR Plan provides fire, wind and vandalism coverage at reasonable rates, but it doesn't cover theft coverage or personable liability coverage. Even FAIR could reject applicants for overcrowding or poor physical conditions of homes.

Marilyn Carpinteyro, a loan counselor with New Jersey Citizen Action, said insurance costs discourage minorities from buying homes. Homeownership rates are significantly lower among minority populations, Census 2000 statistics show.

Nearly 66 percent of New Jersey households are owned, rather than rented, including 40 percent of black households and 33 percent of Hispanic households, compared with 73 percent of white households.

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