Stop Insurance Redlining

What is it and Why Does it Matter?

Redlining is when companies refuse to offer or limit their services or limit to people living within specific geographic areas, especially inner-city or minority neighborhoods. This practice has been illegal since the late 1960s, but it appears to continue to happen in a more subtle form in Michigan.

By using what insurance companies call territorial rating systems, insurers can charge drivers a higher premium based on nothing more than a zip code. Nowhere is this more prevalent and obvious than in Detroit where residents pay the highest insurance rates in the country.

The unfortunate side effect of these policies is that they tend to target low income neighborhoods and in many cases people who can least afford the inflated rates.

It Matters Which Side of the Road Drivers Live On

Perhaps the best example of auto insurance redlining in Michigan is the difference in insurance costs along 8 Mile Rd. on the border between Detroit and Ferndale.

It is shocking to think that a driver in Ferndale just across eight mile road in the 48220 zip code can potentially pay 24 percent less than someone the same age, with the same vehicle, driving record and education would just across the street in the 48221 Detroit zip code. Unfortunately, that’s what is happening.

Case in Point

In the case below we created a fake user profile. A single woman, age 38 with a high school diploma, driving a financed 2010 Honda Civic DX four door. We used two addresses for our insurance shopper:

  • 48220 zip code, right on Eight Mile Road in Ferndale on the border of Detroit
  • Her price quote was $582 a month
  • 48221 zip code in Detroit, just across Eight Mile Road
  • Her rate quote was increased to $720 a month – a 24 percent increase just for moving less than a mile away from the original address.

Tell Your Lawmaker Redlining is Unfair and Must be Stopped

It is beyond time that we treat all drivers fairly. Write your lawmakers and tell them to stop unfair practices in Detroit and other urban communities.