Garamendi Accuses Insurance Industry of Racial Discrimination

Two associations have responded to Commissioner John Garamendi’s recent accusations that the insurance industry’s rating practices are “blatantly discriminatory” and based on ethnicity. Garamendi’s comments recently appeared in an April 20 article in the Contra Costa Times. Representatives of the American Insurance Association and the Personal Insurance Federation of California said that its member companies do not practice or condone racial discrimination.

“If this were happening, this would be major headlines,” said Ken Gibson, vice president, western region at AIA. “There would be fines. There would be certificates of authority being yanked. This would be a huge issue and rightfully so. [We] just can’t let a public official, and especially [our] own regulator, make those kinds of comments about [our] industry in a public forum when it’s so potentially explosive.”

“It’s not based in fact,” said Nicole Mahrt, public affairs director, western region at AIA. “There’s no evidence that this is true. It’s illegal and I don’t think people are doing it.”

Gibson said that industry representatives called the author of the article, Susan Fuller, and confirmed that she quoted the commissioner correctly in the article.

“As far as we were all concerned, we deal with Garamendi on a lot of fronts and the commissioner has a lot of things to say about the industry, and we can deal with those typically in whatever the subject might be,” Gibson said. “But when he says in a public forum, or anywhere else for that matter, that we are blatantly discriminating based on ethnicity, that is a statement that we just can’t allow to go unchallenged on behalf of our members and our industry as a whole.”

Jerry Davies, director of communications for PIFC, said that as commissioner, Garamendi approves all of the industry’s rating plans. “It was mind boggling to think that he could say that when all rating plans are approved by the commissioner and he does have the authority to take any action if he sees any abuses,” Davies said. “If anyone in our industry is [discriminating], we want to be a part of weeding them out because we will not tolerate it.”

AIA and PIFC responded to the accusations by writing the Commissioner a letter, which included a Public Records Act Request. “If, as your comments indicate, the [CDI] is unable to prevent such blatant and unlawful discrimination, we hope you will afford us the opportunity to more fully understand the magnitude of this problem in the marketplace, and perhaps provide us an opportunity to assist in putting a stop to it,” wrote Gibson and PIFC president Dan Dunmoyer.

They then requested copies of all CDI records from the last three years that contain information on consumer complaints alleging ethnicity-based rating practices. PIFC and AIA also requested copies of any CDI studies, reports and publications containing information on ethnicity-based rating.

“I think he will comply with this request,” Davies said. “I think he’ll send copies of something to us, but we strongly feel that it might not be exactly what he’s charging us with. We don’t believe that [ethnicity-based rating] exists.”

“As far as auto rates are concerned, Prop. 103 proscribes that fairly precisely based on number of miles driven, driving record, and number of years driving,” Gibson said. “There are some other criteria involved and can include, in part, the location where you live. But there’s certainly nothing in there that would obviously suggest an ethnic factor per se.”

Mahrt said that the industry does not even collect ethnic data, and Gibson said that it is something that the industry is not capable of collecting even if it so desired.

The AIA and PIFC are awaiting Garamendi’s response to their Public Records Act request.

The CDI did not return calls seeking comments on the issue.
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