If President Clinton, Rep. Joseph Kennedy, D-Mass., and Rep. Cardiss Collins, D-Ill., have their way, homeowners in safe neighborhoods where there are low burglary rates, low fire risks and little property damage from window breakage and graffiti will have their homeowners insurance premiums jacked up to subsidize the insurance policies of residents in higher-risk areas, such as inner cities.
Red-lining once meant that high-risk residents could not get insurance coverage. Today the practice is nonexistent. A national poll conducted by the Roper Organization in 1992 found that 96 percent of inner-city homeowners had homeowners insurance.But red-lining has now been redefined. It now means having to pay risk-based premiums.
According to civil rights activists, a person living near an inner-city crack house who has to pay higher insurance premiums on home and car as a result of the higher risks of theft, fire and vandalism, has been red-lined.
Reps. Kennedy and Collins have proposed "anti-red-lining" bills to fight the fundamental actuarial practice of basing insurance premiums on risk.
Under the proposed legislation, insurance companies would collect and report premium data by geographic region to the federal government. As a larger percentage of blacks than whites live in high-risk areas, the next step is to assert that the insurance companies are guilty of racial discrimination because their high-risk policies are disproportionately in the hands of blacks.
In other words, politicians think that pricing insurance on the basis of risk is evidence of racial discrimination. Once laws and regulations are on the books, the only way insurers will be able to avoid racial discrimination lawsuits will be to subsidize the risk associated with insuring property in inner-cities. To raise the money for the subsidy, insurers would charge above-market prices on policies in the suburbs.
The bottom line is that Clinton, Kennedy and Collins intend to force insurance companies to discriminate against suburban residents in order to discriminate in favor of inner-city residents.
It is interesting that Rep. Kennedy's bill would inflict more damage on suburban residents than the bill proposed by Rep. Collins, a member of the Congressional Black Caucus.
But both bills may be moot because President Clinton has decided to end-run Congress by ordering the Department of Housing and Urban Development to pretend that the proposed legislation is already on the books.
While the Fair Housing Act does not apply to the insurance industry, Clinton has signed an executive order directing HUD to issue guidelines on "property insurance discrimination."
Peter Kaplan, HUD's director for fair housing and equal opportunity, says that he intends to target insurance "practices and policies" that have a "disparate impact" on minority property purchasers.
Clinton and Kaplan are attempting to grab legislative power from Congress despite clear and explicit warnings. Congress stripped insurance regulations from amendments to the Fair Housing Act in 1988.
The insurance industry is but the latest business to be caught in the ever-expanding web of preferments based on race. This year's assault on insurance follows last year's assault on mortgage lenders. Bureaucrats ruled that race neutral lending criteria had "disparate racial impact" on minorities, because fewer minorities than whites could meet the standards.
The insurance industry will have to fight hard if it hopes to escape the federal regulatory net that has ensnared mortgage lenders.