Is the insurance industry's blatant redlining finally being reigned in?

[brizee]

http://www.detnews.com/article/20110...t-constitution

The pertinent bit is towards the very end of the article.

http://www.freep.com/apps/pbcs.dll/a...=2011106060353

It sounds like two seperate programs.

I hope these aren't sabotaged.

There's already bitching in the comments about Detroit getting "special treatment" though.

[Wingnatic]

Special treatment ? As in getting porked in the ass for years because of a zip code where they live kinda special treatment , not to mention credit scores will raise your rates if its low wherever you live . What ever happened to if I can pay the premium , nothing else matters . The industry will use bullshit stats on stolen cars etc . to raise rates , they'll find something to raise the rates . It took forever to outlaw this practice , but no time at all for some judge [[probably paid off ) to repeal the ruling and this wasn't that long ago . Then we have a bulging catastrophic fund , the amount per vehicle we pay went up on that , and the people who set that amount we pay for that every year don't even work for the State of Michigan , they are a group of insurance execs that sit in a dark room and figure out how to screw us more . Now legislation may be pending to repeal the State helmet law . I'm not even sure when you get insurance , the charge for the catastrophic fund applies to them , yet they have the most claims . Insurance industry in Michigan is legal robbery .
Legislators To Review Michigan Helmet Laws
Opponents Cite Concerns Over Helmet Safety
Freedom or safety -- two words that could make or break the motorcycle helmet law in Michigan.
Currently, the law says riders must wear an approved U.S Department of Transportation helmet when riding on public roads.
But two bills have been introduced in the state legislature to repeal the state's helmet law.
One bill would let riders 21 and older to ride without helmets if they carry at least $20,000 in personal liability insurance.
The other bill would let riders 20 and older bike helmet-free if they have passed a safety course or carried a motorcycle endorsement on their driver’s license the previous two years.
Opponents of the legislation who think helmets should be mandatory say that's the best way to boost safety, especially as biking becomes more popular thanks to higher gasoline prices.

Motorcycle crashes account for a disproportionate share of money paid out of the Michigan Catastrophic Claims Association [[MCCA), a fund which is supported by a surcharge on every auto insurance policy in the state. While motorcyclists represent two percent of the assessment paid into the MCCA, they account for five percent of the money paid out.

[1KielsonDrive]

It'll never happen. Just as other big corporations have their way with you, insurance companies will do as they please, keeping in mind that there will be occasional ebbs and flows for theatrical and marketing purposes. Much like oil companies and their gas prices, insurance companies have to pull back once in a while and act like they're concerned and/or constrained by the ?free market? to keep the public in line and believing that companies and congress, their enablers, have the nation's best interests in mind. I've worked in the insurance industry on and off for years. I have a bit of an idea what they're up to.

[JBMcB]

Well, something needs to be done. One of the main reasons insurance is so high in the city is because of the high number of uninsured drivers. If you have insurance and are hit by an uninsured driver, your insurance company has to eat the cost, instead of passing it along to the other driver. They *could* go after the other driver for the costs, but if they can't afford car insurance to begin with, it probably isn't worth it.

[1KielsonDrive]

Well, something needs to be done. One of the main reasons insurance is so high in the city is because of the high number of uninsured drivers. If you have insurance and are hit by an uninsured driver, your insurance company has to eat the cost, instead of passing it along to the other driver. They *could* go after the other driver for the costs, but if they can't afford car insurance to begin with, it probably isn't worth it.

You are probably correct in your assessment. Regardless, the insurance industry makes record profits even after bailouts from you and I, the very people they overcharge while making those profits. I'm not knocking profits, I'm knocking RECORD profits. From us. After bailing them out. That's like giving the crackhead who just broke into your house and stuck you up at gunpoint a few hundred extra to help assist their getaway.

[JBMcB]

Regardless, the insurance industry makes record profits even after bailouts from you and I, the very people they overcharge while making those profits. I'm not knocking profits, I'm knocking RECORD profits. From us. After bailing them out.

Which insurance companies got bailed out? AIG was the largest I could find. There were a couple of life insurance companies [[Hartford, LIncoln) that paid back the bailout loans, but that's it.

The car insurance market is pretty cut-throat right now, with Allstate, Progressive, Geico, Nationwide, and Farmer's all vying for market share. If there is money to be made selling cheap insurance to Detroit drivers, wouldn't somebody be doing it?

[ferntruth]

You are probably correct in your assessment. Regardless, the insurance industry makes record profits even after bailouts from you and I, the very people they overcharge while making those profits. I'm not knocking profits, I'm knocking RECORD profits. From us. After bailing them out. That's like giving the crackhead who just broke into your house and stuck you up at gunpoint a few hundred extra to help assist their getaway.

Aside from AIG, what other insurer received a bailout?

[ferntruth]

The title of this thread is very misleading. Redlining no longer exists, as it is illegal to redline. The term redline means to flat our refuse to sell insurance in a given area. To my knowledge, there are no companies that refuse to sell in Detroit. If they are licensed to sell in Michigan, they must sell to Detroit residents.

They may charge rates that are high, and that may drive customers away, but they will sell the policy if you are willing to pay the premium.

As others have said, the unusually high number of uninsured drivers in Detroit, coupled with the car theft rates and the high number of hit and runs in the city all contribute to high rates.

[1KielsonDrive]

Aside from AIG, what other insurer received a bailout?

The bailouts filtered right throughout the whole system. Insurance companies are pools. Most companies pool their resources as well as their losses. In other words, they share their bets - their gambles. Little Bumfuc* Insurance Company from Hell MI can't hope to cover losses from a major event. They pool with bigger and bigger companies from all over the world. What do you think Lloyd's of London is? It's a pool, not a single corporate entity. If you want a lengthy, technical explanation, you'll have to read up, I don't have time. But that's the basic idea.

[fryar]

[[...)I've worked in the insurance industry on and off for years. I have a bit of an idea what they're up to.

I'll admit that I find this puzzling, though. Isn't there a plethora of insurance agencies, one of which could stand to profit big-time from lowering Detroit car insurance rates to non-redlining levels? I have not worked for insurance companies, so I don't know precisely what the statistics are that they use to calculate the risk per area code or zip code or whatever it is, but it just seems like it would be so obvious a route to market dominance. How does this red-lining in insurance work?

IIRC, wasn't the original red-lining, with housing, based on the promulgation by Fannie Mae, the guarantor of mortgages, of the concept that certain, ahem, demographics increased risk, and so mortgages secured with properties in areas in which these <cough> demographics predominated would not be guaranteed, effectively eliminating access to capital in these areas because there was no guarantee in place? And so something comparable to this is happening here, now?

I'm sure this debate has been had on here many times before [[in fact, I know so). But it is hard to imagine that this is really going on. What does the process look like?

That thread I linked to does contain some quotes for no-fault insurance on old beaters that are far higher than what I paid, a multiple. And yet I was hardly the patron saint of credit bureau flawlessness at the time. I'll admit I find it puzzling that someone would pay hundreds monthly for no fault, almost hard to believe. I do recall that insurance carriers were none too forthcoming when I tried to discern how significant the premium "penalty" would be for living in Detroit, because they weren't allowed to disclose that.

But, I mean, out with it, if anybody knows anything. If this is really happening, let's talk about it. Once in a while, this forum accomplishes something.

Anybody who works for an insurance carrier want to potentially violate their employment terms in favor of social progress and shlep their netbook to a library, download a new browser, register with a new userid, and shed some light on what the deal is or might be?

[1KielsonDrive]

And of course, the stock market is a sure guarantee of riches. Especially at the level of hundreds or maybe thousands of dollars invested. Sure guarantees you a steady income.

[1KielsonDrive]

Stock returns will pay your insurance premiums. For sure. Uh huh. Ask posters here how much their returns pay of their premiums.

[Hypestyles]

If this can have impact, so be it.. but I also want the charter proposal to pass that gives the city leeway to create a public option.. probably won't be perfect, but I hope much better than the other commercial options.. anybody know if this concept exists in other cities at all?

[bartock]

This is not being done in the interest of consumers. I think that they have carefully calculated the impact that lower rates [[and coverage) would have on the number of folks who will get insurance against the costs they are paying for underinsured and noninsured injuries now. The ultimate goal, I believe, is to begin eliminating what is the best coverage in the county if you are seriously injured in a car accident.

[Det_ard]

I'm always amused that none of the folks that complain year after year about record oil company and insurance company profits never seem to do the smart thing and buy their stock.

[1KielsonDrive]

I'm always amused that none of the folks that complain year after year about record oil company and insurance company profits never seem to do the smart thing and buy their stock.

Typical assumption of a white bread rich ass who assumes that everyone has money to invest. In case you're not too sure of it, there are people out here trying to find money for a meal, mortgage, room and medical care.

[Det_ard]

Typical assumption of a white bread rich ass who assumes that everyone has money to invest. In case you're not too sure of it, there are people out here trying to find money for a meal, mortgage, room and medical care.

Nice. Typical shallow-thinker response. You like to pop off with the angry rhetoric but you don't get it. You are cannon fodder for the most simplistic populism. Big=bad. Everything is fixed against us. I can't get ahead because the big, bad corporations won't let me. We're all victims. Waa, waa, waa.

Geez, my babies cried less than you.

And of course you have to assume that someone with a different opinion than you is a "white bread rich ass". Assume that only your rock-stupid-populist mindset has validity. How's that workin'?

[JBMcB]

In case you're not too sure of it, there are people out here trying to find money for a meal, mortgage, room and medical care.

So if companies can make money by selling cheap insurance in Detroit, why don't they? Crap, insurance companies are spending billions of dollars in advertising trying to drum up business. If they could sell dirt cheap insurance to a few hundred thousand Detroiters, that would be worth it, wouldn't it? Or are you implying that every insurance company out there hates black people more than they love making money?

[fryar]

So if companies can make money by selling cheap insurance in Detroit, why don't they? Crap, insurance companies are spending billions of dollars in advertising trying to drum up business. If they could sell dirt cheap insurance to a few hundred thousand Detroiters, that would be worth it, wouldn't it? Or are you implying that every insurance company out there hates black people more than they love making money?

Because the market is plain broke.

Competition and evaporating profits should force the actors to innovate. Solely Progressive Insurance is ahead of this industry's antiquated curve, offering the no-brainer of plopping a small device onto my car's ODB that transmits data points that are actually relevant gauging my riskiness to Progressive via ubiquitous cell phone towers. How often do I brake hard? How often do I drive more than 75? How much do I drive, and is it during times that are more accident prone? I can pull this data up on the web, and see the percentage of savings that Progressive has calculated as appropriate based on these results. All they did was take a commodity part, a Davis Car Chip. With all due respect to them, not actually that hard.

Progressive claims they're not tracking your location with GPS. Everyone is entitled to disbelieve them, or for other reasons choose to maintain the privacy of their driving habits, naturally. But in this age of data crunching, it is intellectually lazy to hold on to the post office as a highly significant predictor of riskiness for car insurance, when it is simply a convention that dates back to an era of data scarcity [[and an inability to efficiently process large data sets).

[1KielsonDrive]

So if companies can make money by selling cheap insurance in Detroit, why don't they? Crap, insurance companies are spending billions of dollars in advertising trying to drum up business. If they could sell dirt cheap insurance to a few hundred thousand Detroiters, that would be worth it, wouldn't it? Or are you implying that every insurance company out there hates black people more than they love making money?

I'm able to state my own case without you putting words in my mouth. That's your inference, not mine.

[fryar]

^ That is amusing.

Other changes in the charter include:
[[...)
— Empowering the city's law department to determine ways to address residents' auto and property insurance needs with a city-run system.

...with a city-run system? I don't mean to rail against this idea - especially in light of the perception, if that should be all it is, that there is actual redlining going on - but, without injecting partisanship, I am also amused at...or maybe bemused by...the novel concept of single-payer car insurance. How mirthful.

National research has found that Michigan has among the highest rates of uninsured drivers in the country -- 19% in 2008-09

That's not just the city, folks, even if we're talking every single city resident. Once again, we have a pathetic statewide problem. I don't mean to say that Northeasterners aren't curt or what-have-you - right now we've got a promising politician doing what he can to get Jon Stewart to crack jokes about his smallish johnson - or that Michigan is particularly sucky, but this is a thing about Michigan in general, whether or not it's a more acute issue in Detroit.

[fryar]

The debate we're having is pretty academic - I don't mean to imply that the society I live in systematically discriminates against me due to superficial characteristics beyond my control - indeed, I know and accept that the system will gouge me a bit if i choose to live in Detroit. I also don't take Det_ard or Ferntruth to imply that I am comparing this marginal financial "inconvenience" to the historical systemic discrimination against minorities. Just to set that straight. Because, for what it's worth, before I actually googled redlining and checked out Wikipedia, I was with Det_ard and Ferntruth on this, thinking that redlining carries all manner of connotations that in this instance don't apply, that here we have a situation where broad brush strokes are accepted for the sake of administrative convenience, but it's at a minimum not rhetorically effective to refer to this issue as redlining.

No, that actuarial reality based on claims. For someone like you that rarely drives it would be nice if there were a policy that was based on verifiable mileage driven. Actually, I've heard something about that recently but I don't know if it exists around here.

I'll resurrect my old car sharing thread because you're tangenting directly into my little car sharing obsession.

But as my response relates to this thread, the redlining is based on my former post office, not on the amount that I drove. The insurance co's failure to take into account factors that *actually* are indicative of my riskiness in favor of an easily accessed charcateristic of mine that correlates to riskiness without causality was just a cherry on top if you will. We have computers now, and ODB ports, and cell phone networks - they could try to assess my riskiness, but they settle for the administrative convenience of a false positive while hiding behind conventions settled upon in the age of pencils, paper and slide rules.

I'm not *just* whining about that, Progressive later did make an effort, which might be the system you heard about, but I'm trying not to threadjack too much.

Hardly an example of redlining.

It's looking to me like it is, though, actually.

To once again refer to Wikipedia as a neutral arbiter representative of the English-speaking world's consensus, an expanded version of my earlier quote:

Redlining is the practice of denying, or increasing the cost of services such as banking, insurance, access to jobs, access to health care, or even supermarkets to residents in certain, often racially determined, areas. [[...) It describes the practice of marking a red line on a map to delineate the area where banks would not invest; later the term was applied to discrimination against a particular group of people [[usually by race or sex) no matter the geography.

So the term has evolved from the specifics of FHA mortgage underwriting policies for certain geographical areas based on race to something no longer necessarily linked to geography or race.

Sounds like a pretty slippery slope. Apparently, it is.

Many believe policies of credit card companies such as American Express that reduce credit lines of individuals that make purchases at retailers frequented by so-called "high-risk" customers to be akin to redlining.

Perhaps I should have said that apparently, many believe it to be so [[a slippery slope), to match Wikipedia's less assertive formulation. But really, what are you left with, if geography and race are eliminated from the equation of what is required in order to qualify for the term "redlining?" Discrimination? Profiling?

The key difference between modern car insurance redlining and "old school" redlining is that my post office is not a legally protected class. It is just as much a falsehood to propose that
a)my riskiness can be determined on the basis of the statistical correlations between riskiness and having my post office; as it is to propose that
b)my riskiness can be determined on the basis of statistical correlations between riskiness and having my race, creed, sexual orientation, and so on.

No, that actuarial reality based on claims.

Challenge Question: Does anybody know whether the practice of redlining could have been supported by statistical correlations between being black and defaulting on one's mortgage? Society certainly didn't treat blacks with kid gloves back then. It should be a wonder if blacks didn't default on mortgages more often.

[Hermod]

Challenge Question: Does anybody know whether the practice of redlining could have been supported by statistical correlations between being black and defaulting on one's mortgage? Society certainly didn't treat blacks with kid gloves back then. It should be a wonder if blacks didn't default on mortgages more often.

I think it was more that the "red-lined" areas were considered places where the home prices would decline and the security for the mortgage [[the home being mortgaged) was not a "secure" asset. Areas rapidly becoming black would be experiencing declining home prices. As a result, mortgages would be disapproved, carry a higher mortgage rate, or be subject to a very high down payment requirement. That would apply whether or not the individual borrower was black or white.

[fryar]

Interesting. If it is the property securing the loan that is being "profiled" on the basis of its neighborhood, we do have a difference between that and what is happening with car insurance, where I am being profiled on the basis of my neighborhood.

Not my car. Presumably. The formula used to compute my rate would likely reveal whether it is I being profiled on the basis of where I sleep, or my vehicle on the basis of where it parks.

Which is an interesting technicality, in my mind. It's probably easier to demonstrate that this is redlining if the vehicle is being profiled on the basis of geography, although it is a moveable asset.

If I am being profiled on the basis of geography, that's just plain lazy on the part of the insurance industry. Perhaps due to high barriers to entry in the industry, it's surprising that there are not more alternatives to this very dated approach on the market.

[Locke09]

Well, since insurance is mandated in Michigan, we should have a right to see the algorithms and the actuarial data.

I don't think the answer is cheaper insurance with greatly reduced coverage. I think the answer is to repeal the mandatory No-Fault insurance requirement. As long as we are a captive audience, we will all have higher than necessary insurance rates.

And competition does not necessarily result in lower prices. There is a location I pass daily with three different gas stations - two across the street from each other and the third half a block away. They keep their gas prices synchronized. And I do mean synchronized. When one changes the others change within minutes.