Florida’s top insurance regulator and some insurance producers, including the former president of the Latin American Association of Insurance Agents, are questioning a report that suggests policyholders in Hispanic neighborhoods in the state pay much higher premiums.
“While we acknowledge public concerns over housing costs, the Florida Office of Insurance Regulation refutes the premise that insurance premium differences are driven by racial discrimination,” said the press secretary for OIR and Insurance Commissioner Michael Yaworsky.
The report from the Consumer Federation of America (CFA), released this month, argues that Hispanic homeowners in Florida may be the victims of “redlining”— the largely illegal practice of charging higher rates in areas based on racial demographics.
“Florida has the largest Hispanic premium gap: Homeowners in predominantly Hispanic neighborhoods are charged 58% more—an average of $5,014 more each year—for the same insurance coverage when it is offered to homeowners in predominantly white ZIP codes,” reads the report, authored by four well-known researchers with the Federation.
The authors said they analyzed 2024 data from Quadrant Information Services, an insurance industry data analytics firm, and other sources. The firm used “test quotes” to compare premiums in ZIP codes across the country for homeowners with an average credit score in a 20-year-old home with a $350,000 replacement value.
Nationwide, Hispanic neighborhoods are charged about 30% more than white-majority ZIP codes for the same home, the report found. But it’s not uniform across the country. California, for example, showed that Hispanic homeowners would pay just 4% higher premiums, on average. In Texas, Hispanic applicants would pay 6% less—or about $313 annually, the study found.
Black homeowners also saw a difference, paying 16% more on average in the U.S., and 13% more in Florida. Florida ranked higher than some other Southern states but lower than in Michigan and Pennsylvania, according to the study.
“As our unique dataset compares identical policies across places, this racial premium gap is not driven by differences in how homes are constructed, the characteristics of homeowners, or the types of coverage that people choose,” the report reads. “Rather, this gap is driven by differences in place, as insurance companies take into account where people live to price policies (called territorial pricing), often using small geographies like ZIP code or even census tract as a shorthand for a range of community-level risks.”
Instead of deliberate discrimination by insurers, though, higher premiums are more likely to be the result of home construction, hurricane risk, credit scores in an area, and crime maps that indicate the number of violent and property incidents in a ZIP code, one Florida agent noted. Some minority neighborhoods may have more residents of lower income and may reflect higher crime rates in adjacent areas.
“I think that report is leaving out a lot of variables,” said Miami agent Dulce Suarez-Resnick, who is past national president of the Latin American Association of Insurance Agents, which holds its national convention this week in Naples, Florida. “There may be discrimination by insurance companies, but not in Florida. Insurers are not allowed to discriminate.”
It’s not clear if the CFA report data included neighborhood crime scores as a factor in premium levels. The use of crime data can, in fact, be an unfair measure of risk, Suarez-Resnick noted.
Insurance carriers use a number of sources for crime maps, including the FBI’s incident reports; local law enforcement maps; or proprietary, geocoded risk reports from CAP Index, Verisk and Cotality, said Mark Friedlander, media relations director for the Insurance Information Institute.
But if those maps are ZIP-code-based, they can cover a large geographic area, with low-crime neighborhoods right next to those with few incidents. Take the Coconut Grove area of Miami, known as one of the most-attractive, upscale addresses in Florida.
“It’s a nice area. But two blocks away is a high-crime area” in the same ZIP code, Suarez-Resnick said, noting that she knows someone who was mugged in the area.
Crime scores also can reflect incomplete data, can provide a misleading picture, and paint too broad a brushstroke across neighborhoods, according to RCM&D, a Unison Risk Advisors company.
The CFA report said it included dozens of characteristics for homes and homeowners, but it noted that the premium gap is not adjusted for all neighborhood-level risks.
Historically, redlining is not unheard of in Florida and other states. One longtime agent noted that discrimination was once a matter of course in insurance pricing and availability, at least for some carriers.
“When I first got in the business, that’s the way it was,” said Tom Lynch, a Delray Beach agency owner who started at the agency in the 1970s.
He said a number of insurers at the time, particularly auto insurers, refused to write some Miami neighborhoods, due in part to what they termed “friendly juries” that often sided against carriers in claims disputes.
But today, with anti-discrimination laws and regulations, carriers are more likely to look at the quality of a structure’s construction, its proximity to the coastline, or wind-resistance measures of a home—regardless of the homeowners’ national origin or ancestry, Lynch said.
Yaworsky’s office agreed, insisting that deliberate racial discrimination is forbidden by law.
“Homeowners insurance premiums are tied strictly to localized risk factors and actuarial data,” OIR Press Secretary Shiloh Elliott said in an email. “Geographic differences in pricing reflect localized hazards—such as hurricane vulnerability, flood zones, property replacement costs, housing age, and local litigation or claims history—rather than the demographic makeup of a ZIP code.”
Florida law, like those in most states, requires that insurers’ proposed rates must not be “excessive, inadequate, or unfairly discriminatory.”
“In short, we maintain that price variations across regions are a reflection of geographic and structural property risks rather than demographic pricing,” she noted.
The CFA report acknowledged that other factors may be at play. If homeowners in some minority neighborhoods are more likely to file claims, then claim frequency, not race, could help explain differences in premiums. But the analysis attempted to control for that, accounting for differences in claim frequency and severity, the authors said.
In response to the report’s revelations, states should now prohibit insurers from using ZIP or smaller geographic areas when setting premiums, the authors concluded. And Insurers’ transaction-level data should be made public, similar to data reporting required in home lending.
Applying Home Mortgage Disclosure Act standards to insurance companies “would help researchers more accurately measure the racial premium gap in homeowners insurance and work towards solutions,” the study argued.
The full report is available here.
Top photo: Miami sunset (DepositPhotos)
Topics Florida Pricing Trends
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