COMMUNITY DEVELOPMENT CORNER - The Return of Insurance Redlining
Written by SP Editor
Insurance redlining has a long history as part of an evolving structure of housing discrimination that has perpetuated the segregation of US cities. As a sales manager of the American Family Insurance Company told one of his agents in 1986 “quit writing all those blacks…Very honestly, I think you write too many blacks…We cannot afford them...You got to sell good, solid, premium paying white people.” But in the 90s many of us, including me, thought this problem had largely been solved after the National Fair Housing Alliance, the NAACP and other civil rights organizations settled complaints against many major insurance companies (e.g. Allstate, State Farm, Nationwide, Liberty, American Family and more) in which those insurers agreed to eliminate problematic underwriting and rating practices, open offices and grow their investments in traditionally redlined neighborhoods, increase the diversity of their work forces, and more. But in part for different reasons, insurance redlining has returned.
Pointing to the increasing frequency of so-called “natural” disasters (e.g. floods, hurricanes, fires etc.) and climate change generally that is associated with these occurrences, insurance companies have experienced losses which they claim has forced them to increase their rates or leave markets altogether. But there is a growing consumer advocacy community, joining longstanding civil rights groups, that is fighting back.
There is no question that home insurance has been more expensive and difficult to find in recent years. One industry group, The Insurance Information Institute, reported that 12 percent of homeowners had no insurance in 2022 compared to 5 percent who were without coverage in 2019. And the Consumer Federation of America has reported that the share of families going without coverage was significantly higher in low-income and non-white communities. Premiums have skyrocketed by 37.8 percent between 2019 and 2024 according to the Wall Street Journal. The sharpest increases occurred most recently growing by 24 percent, from an average of $2,656 in 2022 to $3,303 in 2024 as reported by Douglas Heller of the Consumer Federation of America at the Advancing the Fair Housing Agenda conference at the University of Illinois (UIC) Law School Fair Housing Legal Support Center in September 2025.
Increasing insurance premiums, of course, reduce resources families have to cover other necessities. Going without insurance creates serious risks. And there are other costs not so obvious. At that same UIC conference, Caroline Nagy of the Americans for Financial Reform Education Fund presented research from a January 2025 report of the Federal Reserve Bank of Dallas showing the following:
A borrower is more likely to become delinquent on their mortgage following an increase in their insurance premium: for every $500 in annual increased homeowners’ insurance cost a borrower is 20 percent more likely to become 30-day delinquent on their mortgage;
Households take on greater credit card debt to cover their costs while adjusting to a new insurance premium;
Households are more likely to default on credit card debt after an insurance premium increase.
Insurers point to the increases in so-called “natural disasters” (fires, floods, hurricanes) that some acknowledge can be attributed, in part, to climate change. As their losses increase due to these events, they need to increase their premiums or, if state regulators (insurance is one industry that is regulated primarily at the state level) don’t allow the rate increases they request, withdraw from selected markets. But this is unpersuasive for at least two key reasons.
While it is the case that in 2023 the industry experienced an underwriting loss of $21 billion according to Insurance Business, the Insurance Journal reported that the industry earned $73.9 billion in investment income. But perhaps a greater problem with this industry explanation is that insurance companies are major investors in the fossil fuels that contribute significantly to the climate change they claim is causing their losses to climb. This is a bit like the young child who kills his parents and then pleads for mercy from the court on the grounds that he is an orphan.
Market forces alone will not resolve these contradictions. It is not sufficient for state regulators to simply allow insurers to increase their rates in response to the frequency of these so-called natural disasters. Consumer groups are starting to pressure states to respond more comprehensively and creatively to these developments. Connecticut is considering a fee on insurers that insure fossil fuel producers. California is considering a plan that would require insurers to sell more policies in fire-prone areas as a trade-off for allowing increased rates. The State of New York, spurred by the organization New York Communities for Change, is considering what might be the most expansive and effective response.
The Insure Our Communities Act, which has sponsors in the New York State Assembly and Senate would, basically, update that state’s Community Reinvestment Act to cover insurance companies. That proposal would: (1) establish requirements for insurers to cover properties and invest in all communities including low- and moderate-income neighborhoods and to people of color consistent with safe and sound practices as is currently required of banks, (2) prohibit New York based insurers from insuring new oil, gas and coal projects, (3) prohibit New York based insurers from investing in oil, gas, and coal companies, (4) prohibit discrimination by insurers based on climate risk also known as “bluelining,” and (5) prohibit insurers from dropping coverage for one year after a disaster.
In describing regulation of industry investments in private credit, Virginia Insurance Commissioner and President of the National Association of Insurance Commissioners (the NAIC is basically a trade association of the nation’s state insurance regulators) Scott A. White told the Wall Street Journal “State insurance regulators are committed to rigorous oversight that keeps pace with rapidly changing insurer investment practices.” (Letters to the Editor April 13, 2026) Hopefully this will prove to be the case for more than just private credit investments.
Insurance redlining has a long and winding history. Hopefully, the same will not be said for its future. Significant progress was made in changing the basic business model of most major insurers in the 90s. There is more to be done. But there is also a stronger consumer advocacy infrastructure today to extend that progress.
Gregory D. Squires is a Research Professor and Professor Emeritus in the Department of Sociology at George Washington University