In accordance with California Code of Regulation (CCR), Section 2646.6, the Commissioner shall report those communities within California by ZIP code that the California Department of Insurance finds to be underserved by the insurance industry. The three main criteria to identify an underserved ZIP code are: 1) High Uninsured Motorist Rate; 2) High Minority Percentage; and 3) Low Per Capita Income.
The Department identified 151 ZIP codes that were underserved in 1995. In 1990, the Department identified 157 ZIP codes. 28 ZIP codes that were underserved in 1990 did not meet the criteria for underserved in 1995. In addition, 22 ZIP codes that did not meet the criteria for underserved in 1990, do meet the requirement in 1995.
The report that follows provides company data for the major property and casualty lines of business: fire, home, auto, and commercial multiple peril. The report shows the following data for the state of California and in the identified underserved ZIP codes:
- the number of earned exposures
- the number of agents or agencies
- the number of service offices
- the number of direct solicitations by mail for private passenger automobile
Approximately 6% of all private passenger auto insurance in the state were sold in the underserved communities. This is well below the percentage of registered vehicles in underserved communities, approximately 13%.
- Of the larger auto insurers in California, four wrote 7% or more of their auto liability insurance policies in underserved communities: 20th Century (11%), Auto Club of Southern California (8%), Mercury Insurance (8%), and Allstate (7%).
- Other large insurers were not above the statewide level of insurance sold in underserved communities. At the statewide level was Farmers (6%). Below the statewide level were State Farm (4%), Safeco (4%), and National General (4%).
- Dwelling Fire insurance is sold at a much higher rate in underserved communities than homeowners insurance. The difference between the products is that homeowners insurance coverage includes not only fire protection, but also protection against theft and liability. While 16% of California’s population resides in underserved communities, 21.67% of the fire insurance sold in California was sold in underserved communities, versus only 6.62% of homeowners insurance was sold in underserved communities. Approximately 9-10% of all commercial insurance was sold in underserved communities, depending on the type of commercial coverage.
- As for agents or agencies and service offices in the underserved communities, the percentages range from 4% to 5%. This is, again, considerably lower than the percentage of people living in the underserved communities, approximately 16%.
- Approximately, 5.91% of total solicitations by mail were made in the underserved communities.
The RH-310 regulations require insurers to gather information on the race and national origin of applicants. However, individuals seem reluctant to provide their racial identity. Since 1995 was the first year this data was collected and significant resistance was expected from the applicant population, the Department has also included in this report data collected in 1997 to see if insurance applicants have lessened their resistance to disclose their race over time. The data indicates that resistance has increased rather than decreased from 1995 to 1997. From 1995 to 1997, the percentage of applicants declining to give their race increased approximately 4 percentage points from 65% to 69% for personal lines of business and for commercial lines the percentage went from 82% to 83% of applicants.
This report of 1995 data represents an important first step in assessing the insurance industry’s participation in all of California’s communities. There are no comparisons made to prior years because this type of data was not collected until the passage of CCR 2646.6 in 1994. As the 1996 data becomes available in April, 1999, the public will be able to see whether there was an improvement on a statewide level, as well as an increase in the participation of specific insurers in underserved communities. A number of insurers initiated programs during 1995 and 1996 to increase their participation in underserved communities. The 1996 data will be a tool to evaluate these programs.
The most troubling portion of the 1995 data is in the area of private passenger auto insurance. The data points to the need for a comprehensive effort to include underserved communities in the auto insurance market. The Insurance Commissioner has already begun the process of gathering together community leaders to understand what methods of inclusion would best serve underserved communities. Such methods should be compared to the methods employed by insurers with low participation levels in underserved communities. Lessons can also be learned by looking at the efforts of insurers with higher participation levels in underserved communities. Key to this effort is that insurance companies, individually and as an industry, realize the need to increase their efforts to reach underserved communities.
The Department expects that some insurers will respond to this report by shifting the focus towards individuals’ choices not to buy insurance. For many, the price of insurance and the income of the consumer do lead to choices to go without insurance. For many, however, there is not a meaningful choice made about insurance because of a lack of complete information. Recently-released Department of Insurance research indicates that many residents of high uninsured communities have little information about insurance (Uninsured Motorist Research Studies). Further, the uninsured population tends to have much less trust of insurance companies than those with insurance. The uninsured is much more disconnected from the insurance system and does not engage in highly focused efforts to obtain insurance. There is an information void that must be filled by insurers, community-based organizations and the Insurance Commissioner’s office. This report highlights the need for comprehensive inclusion efforts, and provides a mechanism to view the results over time.
Public information requests should be directed to the Department’s press office at (916) 492-3566. Any questions or comments regarding the methodology of the data collection presented in this report may be forwarded to Ben Gentile, Bureau Chief – Statistical Analysis Bureau at (213) 346-6316.
1996 Commissioner's Report on Underserved Communities