Agenda - 04-15-2008-3d - Laserfiche WebLink

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Oran a Coun North Carolina - AIFCH - 2007 9 tY, opposed to the location of the property. Tier structures can then cause changes to the base rate depending on a number of factors. The most significant factors used to establish the rate tiers25 are: ® Loss history of the individual • Age of the property, though the specific age used is variable (i.e., some companies may have higher rates or not write insurance for houses older than twenty-five years while other companies will use forty years or older). • Value of the dwelling ® Other lines of coverage, such as auto insurance, with the same company ® Years insured with the company The use of age and the value of the dwelling as determinants of rates can have a significant impact on the older sections of Orange County where the housing stock is older and typically of less value. These two factors alone can increase the rates for insurance being offered and even discourage companies from offering a full range of products in these geographic areas. The demographic analysis of the community clearly shows that a disproportionate number of Blacks, Asians, Hispanics and American Indians live in the older sections of Orange County. Though using age and value of the dwellings is a neutral policy, it still may impact the composition of the community in a negative manner. 10.2 Credit-Scoring Credit scoring is a criterion far determining rate tiers and may be an underwriting tool.26 As such, a credit score can become a barrier to individuals and families trying to purchase a home or to tenant(s) required to carry rental insurance as part of the lease. Since the use of credit scoring as a criterion to qualify for insurance is new, there have been no studies measuring its impact. Based on the 2000 Census data, the correlation between minorities and poverty was very high (.726).27 It is reasonable to assume that the use of credit scoring as a property insurance underwriting tool would result in a discriminatory impact on Blacks and other minorities who are disproportionately represented in low-income categories. In a ruling on September 3, 2003, the 5th U.S. Circuit Court of Appeals allowed a nationwide class action brought by six minority policyholders challenging insurers' use of credit scoring in pricing both automobile and home owner's policies to continue. In Dehoyos, et al. v. Allstate Corp. et al., the minority plaintiffs alleged that Allstate's use of credit-scoring violated federal civil rights laws (42 U.S.C. 1981 and 1982) and the housing law (42 U.S.C. 3601). The plaintiffs argued that Allstate employed a nationwide scheme of intentional racial discrimination against minorities, charging them higher premiums for property and casualty insurance than whites had to pay. They also argued that Allstate used credit scores, a factor they contend has no reasonable relationship to risk of loss, to justify placing minority applicants 36