Erie Insurance unlawfully rejected Baltimore auto customers in minority neighborhoods, state agency finds

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State regulators have ruled in favor of four Baltimore-area insurance brokers who accused Erie Insurance more than two years ago of discriminating by engaging in insurance “redlining” of predominantly Black neighborhoods in the city.

Three of the brokerage firms, all small businesses, filed separate complaints in January 2021 with the Maryland Insurance Administration; they are Baltimore Insurance Network LLC of Bowie, Ross Insurance Agency of Windsor Mill and Welsch Insurance Group of Baltimore. All contract or had contracted with Erie as agents to sell auto insurance policies. A fourth brokerage, Baltimore-based Burley Insurance, filed a similar complaint.


The insurance administration found that Erie unlawfully canceled or rejected business from brokers based on race or for other discriminatory or arbitrary reasons. The insurer also unlawfully canceled or changed agreements for qualified applicants based on “adverse loss ratio,” a measure of an insurer’s profitability, the state agency said in the separate rulings, all issued May 24.

“The loss ratio metrics that Erie adopted were designed to target agencies writing business in urban areas with large minority populations and to reduce the volume of business being written in those areas,” the agency said in its ruling. The practices were “designed to reduce business, and did reduce business, in dense urban areas with high minority populations.”


The insurer, a Fortune 500 company with more than 6 million home, auto, life and business policies, disagrees with the findings, a spokesman said Monday. The company requested a hearing with the agency on the findings Friday and said it expects to “defend our company against these claims.”

“We ... are dismayed by these allegations because they are inconsistent with our values,” said Matthew Cummings, the spokesman, in an email “Erie Insurance is deeply rooted in the commitment to treat others with dignity and respect. ... Erie Insurance is committed to fairness, equity and diversity in every aspect of our business.”

The state’s investigation, in which regulators reviewed the complaints, Erie’s response and other documents, found that Erie’s auto insurance business in Maryland was not profitable. But instead of adjusting underwriting eligibility guidelines and rates to improve profitability, Erie maintained its broad guidelines and set a secondary layer of eligibility standards that agents were expected to use to reject qualified applicants. That cherry-picking scheme is known as “front line underwriting,” the ruling said.

The state said it is continuing a broader investigation of Erie’s market practices to determine whether the actions are part of a larger pattern of discrimination.

Craig Ey, a spokesman for the Maryland Insurance Administration, said the agency had no further comment beyond the ruling letters.

The original complaints accused Erie, which underwrites policies sold by the firms, of denying services to residents of certain neighborhoods based on race or ethnicity. The complaints say Erie refused to underwrite policies based on a potential client’s race, ethnic origin, neighborhood and/or socioeconomic status.

Both Baltimore Insurance and Welsch said in their complaints that Erie urged them to not sell policies to people in Baltimore with “city sounding names.”

Baltimore Insurance Network said it was told by an Erie branch manager to “place those people elsewhere, I don’t care where, just not with Erie. They don’t fit Erie’s appetite. Find better people.”


That branch manager also told Baltimore Insurance that it was “devaluing the brand” by writing insurance policies for people in predominantly African American neighborhoods, and that the brokerage had to “understand Erie’s appetite.”

Likewise, Welsch Insurance Group’s Thomas A. Welsch was told to get his business “from somewhere else.” Welsch’s contract with Erie was terminated in August 2019, citing poor underwriting practices and unacceptable policyholder service.

Baltimore Insurance said in its complaint that it was instructed to reduce its sales by 30%, by rejecting applicants who qualified for coverage and were mostly Black and living in inner-city neighborhoods. The firm’s complaint says Erie required the brokerage to include criminal record checks for applicants, most of whom lived in low-income neighborhoods, though such checks were not part of Erie’s underwriting standards or the broker’s training.

Cary J. Hansel, an attorney for Baltimore Insurance, said all the agencies that filed complaints highlighted similar issues.

“Erie was, through a variety of mechanisms, trying to force all ... of them to stop selling to low-income people in Baltimore, and these are people who met the requirements to buy the insurance,” Hansel said.

In his client’s case alone, “these are hundreds if not thousands likely affected members of the public who Erie rejected based on discriminatory practices that the insurance administration has found to be unlawful,” he said.


The state’s ruling said Erie gives new agents a manual explaining that front-line underwriting means “choosing and developing the right relationships,” and says agents are “best positioned to detect or investigate unfavorable aspects of a risk before submitting the account to company underwriters.”

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The guide instructs agents to use criteria outside Erie’s underwriting guidelines and rating plan rules to determine which policies to write with Erie, the state’s ruling said.

Erie penalized brokerage firms that failed to engage in discriminatory practices, by reducing commissions or terminating contracts, the state found.

Hansel said his client, which continues to sell Erie’s insurance, took a risk blowing the whistle on discriminatory practices.

“A lot of their livelihood turns on their ability to maintain contracts with Erie to sell their insurance,” Hansel said. “Our clients really risked their livelihood to come forward.”

The agency ordered Erie to calculate and pay the agencies all amounts in commission that had been withheld between Dec. 1, 2019, and this May, when Erie had notified the insurance administration it would restore commissions.


Erie works with 13,500 licensed agents who serve customers across the company’s territory, Cummings said.

“Erie Insurance is proud of the strong relationship we have with our independent agents in Maryland,” he said. “We are confident that the business goals and service expectations we set for our agents are appropriate and reasonable and that our underwriting practices comply with applicable state insurance laws and regulations.”