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Orange County, North Carolina - AIFCH - 2007 <br />This statement also hits home in Orange County as it tries to address the many issues and <br />demands to strengthen neighborhoods, repair deteriorating housing and create more affordable <br />housing. <br />Insurance redlining occurs when insurance agents, offices and/or companies decide that certain <br />areas of the community will not be offered home owner's insurance, that the number of policies <br />offered will be limited to a certain number or that they will not offer all the various home owner's <br />policies that they have. <br />Many traditional industry-underwriting practices, which may have some legitimate business <br />purpose, also adversely affect minorities and minority neighborhoods. Many companies have <br />minimum value and maximum age requirements for properties to qualify for their home owner's <br />policies.. For example, a home would be disqualified if it was valued at $25,000 or $35,000 or <br />less, or if it was constructed before 1950. In some studies, minorities were required to produce <br />a credit check or meet for an interview with the agent before being given a quote. <br />Studies, including the U.S. Department of Housing and Urban Development's National Housing <br />Survey, show evidence of a racial gap in the availability of property insurance. While part of the <br />gap can be explained by financial considerations of the insured, conditions of properties and <br />general risk related factors, the racial gap typically remains substantial even after these factors <br />are taken into consideration. <br />Low-income and high-minority neighborhoods are discriminated against in the provision of <br />property insurance. Even if intentional racial discrimination is not widespread, traditional industry <br />practices still adversely affect racial minorities and minority neighborhoods. The lack of <br />insurance coverage is an impediment to the redevelopment of urban communities. <br />10.1 Rating Practices <br />Insurance companies establish a base rate (sometimes referred to as an "overall" rate) <br />determined primarily by the specific location of the housing. This rate is based on the premiums <br />they receive from a given geographic area, the losses incurred within that area, and the <br />expenses of that company to write and administer the policies.24 Thus, the amount of coverage <br />in the past within a particular area of the County directly impacts present rates offered by a <br />given insurance company. If the company has historically under served a geographic section of <br />the community, the current base rate will reflect the historic lack of premiums within that area. <br />This can have the effect of perpetuating the lack of insurance services resulting from historic <br />redlining or other causes. <br />Some companies have two rating tiers and others may have as many as four tiers in the area of <br />home owner insurance. Tiers are much less common in the area of tenant home owner <br />insurance, though a few companies may have more than one tier. The determination of what <br />rating tier to apply is more a function of the person or persons applying for the insurance as <br />35 <br />