There are Red Lines and there are red lines. If Gov. Larry Hogan and the General Assembly are serious about boosting Baltimore's economy — particularly after the loss of the $2.9 billion Red Line light rail project — they need to do something about the other kind of "red lining," the practice raising car insurance prices for certain city neighborhoods based on race.
A nationwide study released last week by the Consumer Federation of America found good drivers living in predominantly African American ZIP codes are charged significantly more for car insurance than drivers with similar histories living in white neighborhoods. And what city generated the greatest disparities of all nationwide? That would be Baltimore, where rates in black neighborhoods were as much as double rates in mostly white neighborhoods.
That's no small matter. This difference for some households could amount to thousands of dollars per year, and Baltimore's notoriously high car insurance rates have often been cited as a major reason (along with high property taxes, crime and underperforming schools) that cause families to move out of the city. The big disparity in rates is not only unfair, it hurts Baltimore in a particularly problematic way — making it more difficult for economically disadvantaged city residents to commute to a job.
The problem is more complex than a bunch of racist insurance executives deciding that certain neighborhoods should be denied coverage, of course. That would be blatantly against the law. Instead of overt racism, the disparities likely have more to do with how insurance companies track claims and rate risk. That most, if not all, use ZIP codes, for instance, plays into Baltimore's historically segregated housing patterns. That a driver's poor credit history and not merely his or her driving record is used to justify higher rates has an especially harsh impact on low-income city neighborhoods, which also tend to be predominantly African American.
To be fair, Baltimore also has a litigious history. Accident claims have been more numerous in the city not just because of more fender-benders but also because there are lawyers who aggressively drum up claims working with less-than-scrupulous medical clinics that support "soft tissue" injuries like whiplash that are difficult to disprove. Nevertheless, insurance companies and the Maryland bar have already done much to address this pattern of abuse — as well as the "jump in" phenomenon where an MTA bus involved in an accident suddenly acquires more riders claiming an injury of some sort. But keep in mind, too, that this pattern of discrimination isn't just a city phenomenon — the CFA study found African American drivers in more affluent, non-urban centers paid higher rates as well.
A state task force is due to make recommendations on car insurance affordability next year, and Maryland Insurance Commissioner Alfred W. Redmer Jr. says his staff will make sure any rate gets a thorough examination for actuarial justification. We certainly hope so, but historically, insurance commissioners have judged rates to make sure they are both adequate and not excessive, not to address disparities that might be keeping black neighborhoods in poverty.
Here are some possible fixes: First, require insurers to draw territories larger than a ZIP code, perhaps establishing the entire Baltimore Metropolitan Area as one ratings area. City insurance rates would immediately fall and prices would be set in ways that would seem more fair — how well one drives, how often one has made claims in the past, annual mileage, the make and model of vehicle and so forth. Second, take credit history out of the equation entirely. Insurance companies can always drop a policy if premiums aren't paid, so there's no risk to them.
Next, expand the role of MAIF, the Maryland Automobile Insurance Fund, the independent state agency that provides car insurance coverage to state residents turned down by private insurers. MAIF could lower its rates tomorrow by billing private insurers under what's known as an "assessment" to make up the difference. Essentially, that would help subsidize low-income drivers much in the same way the Maryland Energy Assistance Program helps poor families pay their utility bills.
The goal here is not simply to make Baltimore a better place to live; it's to take racial preference out of the equation and to make it easier for city residents to get to work. As Governor Hogan said in announcing his current efforts to redraw MTA bus routes, attempting to commute to a job by way of the city's dysfunctional mass transit system is a challenge at best. For many people, owning a car is the key to a better future. If Maryland is not going to invest much in Baltimore public transit, the least the folks in Annapolis could do is end the car insurance disparity.