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CA Department of Insurance

2006 Commissioner's Report on Underserved Communities

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Introduction

The Community Service Statement under California Code of Regulations (CCR) Section 2646.6, has the purpose of addressing the issue of availability and affordability of insurance in "underserved" communities and of promoting anti-discrimination so that all have equal access to insurance coverage in California.

The current Community Service Statement regulations require the CDI to collect and analyze data from home, personal auto, commercial multiple peril and commercial fire insurers in California, for all ZIP codes and identify those that are considered as "underserved". "Underserved" ZIP codes are those which meet ALL the three criteria as described under Table A section below.

The Commissioner collects and reports earned exposures for the following business lines:

  1. Line 1 - Fire
  2. Line 4 - Homeowners Multiple Peril
  3. Lines 5.1 and 5.2 - Commercial Multiple Peril (both liability and non-liability portions)
  4. Line 19.2 - Private Passenger Automobile Liability

The Commissioner also gathers and gives details on the number of agents and service offices in the "underserved" areas, with their corresponding data as a percentage to statewide totals, for each insurance company.

This report represents about 98%[1] of the total home, personal auto and commercial multiple peril and commercial fire market.  It demonstrates that 145 communities in California are "underserved" as defined herein.


About this Report

This report consists of five tables (Tables A through E):

Table A - ZIP Codes in UNDERSERVED COMMUNITIES

This table lists the communities in the state of California, by ZIP code, that fall within the definition of "underserved" pursuant to Section 2646.6(c)(1)(a-c) of the CCR (see below). All three criteria must be met for a ZIP code to be deemed "underserved".

Per Section (c) of CCR code 2646.6, a community shall be deemed to be "underserved" by the insurance industry if the Commissioner finds:

  1. the proportion of uninsured motorists is ten percentage points above the statewide average as reflected in the most recent Department of Insurance statistics regarding the statewide average of uninsured motorists; and
  2. the per capita income[2] of the community, as measured in the most recent U.S. Census, is below the fiftieth (50th) percentile for California; and
  3. the community, as measured in the most recent U.S. Census, is predominantly minority. Predominantly minority community can be qualified as any community that is composed of two-thirds or more minorities as those groups are defined in subsection (b) (6) (A) through (D) of CCR Code 2646.6.

The Department identified 145 ZIP codes that were "underserved" in 2005. In 2004, the Commissioner's Report of "underserved" Communities identified 147 ZIP codes. For this report, 5 new ZIP codes were added and 7 ZIP codes were removed. The reason for the addition or deletion was due to the change in the percentage in the uninsured motorist rate which fell either above or below the statewide rate.

Table B - Summary Statistics

The purpose of this table is to summarize the number of earned exposures statewide and in the "underserved" communities.

Table C - Number and Percentage of Earned Exposure per Company

The purpose of this table is to provide total earned exposures, statewide and in the "underserved" communities, per company, including the percentage of total earned exposures in the "underserved" communities to statewide data. This report represents approximately 98% of the insurance market for the lines of business considered under the Community Service Statement. This table is comprised of three sections, with one section for each category of insurance business - real and personal property, private passenger auto, and commercial multi-peril and commercial fire.  Each section consists of aggregate totals and reports the coverages that are written by the company (listed alphabetically).

Table D - Service Office Data per Company

The purpose of this table is to provide the number of service offices per company in California and in the "underserved" communities, including the percentage of service offices in the "underserved" communities to statewide data. The table lists the companies alphabetically and reports the largest number of service offices reported under the lines of business considered in the Community Service Statement for each business type - personal and/or commercial. A service office consists of sales, marketing and/or claims services. Note that a service office can manage both business types and that a service office can represent multiple individual companies within the same parent company.

Table E - Agent / Agency Data per Company

The purpose of this table is to provide the number of agents or agencies throughout the state of California and within the "underserved" communities that are contracted to write insurance for the companies (listed alphabetically), and the percentage of agents or agencies in the "underserved" communities to statewide data. The table reports the largest number of agents or agencies reported under the lines of business considered in the Community Service Statement for each business type - personal and/or commercial. Note that an agent or agency can manage both business types and that an agent or agency can represent multiple individual companies within the same parent company.

It is important to note that the number of agents or agencies will differ greatly between companies due to the different marketing techniques that each company incorporates, namely: captive, independent, and direct marketing. In addition, some companies provided the number of agents, whereas, others provided the number of agencies. Agent/agency information for those companies which write business using the direct marketing approach do not exist and therefore, are not found in this report.

Important Terms and Insurance Coverages Provided


Conclusion

Communities that are considered "underserved" are with no or little insurance protection. Absence of or inadequate insurance protection can be detrimental to people's lives. To ensure that ALL individuals and families, as well as businesses or organizations get the insurance protection they need against the adverse financial consequences of losses, is one of the goals of California Department of Insurance. California Code of Regulations Section 2646.6 (CCR), paves the way for the department in its strong mission to continually identify these "underserved" communities, so they too can acquire the insurance protection they need.

This report exhibits little change from the 2005 Commissioner's Report on "underserved" Communities. It continues to show that large percentage of dwelling fire business, most notably California FAIR Plan, and assigned risk auto written in the "underserved" community indicate that low income, high minority communities were not only being "underserved" but those that did buy insurance, purchased insurance that offered less coverage.

This report is only providing the facts and therefore, can not address the issue as to why some people do not have insurance. It is up to the community, insurance industry and the Department to make sure adequate coverage can be made available to all people. However, with this report, it is with hope that it can continue to encourage the insurance industry to invest and to make insurance accessible and affordable in the "underserved" communities, while the California Department of Insurance, continues with its utmost goal of trying to educate and help everyone benefit the protection and the peace of mind that insurance can offer.

Below are examples of how the department tackled or is dealing with the "underserved" communities:

What has the California Department of Insurance (CDI) done or is still doing to address these "underserved" or uninsured communities?

  1. The California Low Cost Automobile pilot program ("CLCA") which was enacted in 1999, to create an affordable insurance option for low-income, good drivers, has been enhanced and modified to cater more communities. Thousands of formerly uninsured drivers are now insured through the CLCA Program, thus providing access to an affordable insurance option for low-income households.
  2. CDI seeks to aggressively promote the CLCA program, through its Consumer Education and Outreach project, to "underserved" communities in order to make insurance affordable to more Californians. The outreach activities keep the public informed of available programs or information that will be beneficial for them. They are not only geared towards auto insurance but to other types of insurance as well.
  3. COIN (CALIFORNIA ORGANIZED INVESTMENT NETWORK) was established in 1999 and is a collaborative effort among the California Department of Insurance, the insurance industry and the community. Its goal is to provide leadership in increasing insurance industry investment in "underserved" and rural communities throughout California. It has its shares of successes with insurance companies investing in California urban and rural communities with low-income families.

Contact Information

Any questions or comments regarding the methodology of the data collection presented in this report may be forwarded to:

Ben Gentile
Division Chief
Statistical Analysis Division
e-mail: gentileb@insurance.ca.gov
phone: (213) 346-6316

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[1] 98% of the market represents data that has been through an extensive validation process and are considered reasonable. 2% of the market either reported data that failed our validation or plainly did not comply with the regulation.
[2] Per capita income was estimated by Western Economic Research.

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