Last year, the Consumer Federation of America reviewed Baltimore area car insurance rates and found this disturbing phenomenon: If you lived south of Cross Country Boulevard in Baltimore, you paid premiums for basic coverage that, on average, were 36% higher than the equivalent driver living to the north. Here was another way to look at it: Drivers who live in the city ZIP code of 21215 pay about $620 more a year for government-mandated car insurance coverage than drivers living in 21209, which is mostly in the county.
That’s problematic for any number of reasons, not the least of which is that this disparity is helping drive people away from the city. But here’s something else people should realize about the two ZIP codes, the city-based one where drivers pay more, is 79% African-American, while the other is mostly white.
Insurance companies insist that this system of setting car insurance rates based on ZIP codes — a practice known as territorial rating — is fair because it reflects claim experience in those jurisdictions. Higher densities mean more collisions, and higher crime rates mean more car theft, vandalism and insurance fraud (with fraudsters working with personal injury lawyers to make false claims based on phony, but hard-to-disprove, soft tissue injuries). The problem with this argument is that the Average Joe with a good driving record and no larceny in his heart still has to pay the higher rate based simply on which side of the boulevard he lives. This perpetuates historic redlining and discrimination.
This afternoon, the Senate Finance Committee is scheduled to hold a virtual hearing on Senate Bill 805 that would reduce territorial rating in one of two ways. It would either limit the impact on premiums to no more than 25%, or it would reduce the number of insurance “territories” to five, which would likely have a similar effect. Last week, a hearing conducted by the House Economic Matters Committee on the measure, H.B. 1251, met with predictable results: Consumer advocates cheered for it, while lobbyists for the insurance industry vigorously opposed it. Still, the bill represents real progress. In years past, advocates have pushed for a total repeal for territorial rating. This marks a compromise that deserves broad support, particularly from lawmakers who say they care about equity.
Insurance companies claim it was never their intention to discriminate, and that’s likely the truth. But that’s like saying the departure of middle class white people from Baltimore did not carry a racist intent, rather it was merely a desire to live in the suburbs. Maybe so for some, but it still had the effect of leaving some city neighborhoods bereft of employment, decent housing and good schools. At this moment, intent is unimportant; the real question is: How do we fix this destructive inequity? It isn’t by charging people hundreds (and in some cases, thousands) of dollars more to drive a car they may need badly to get to a job and support their families. Baltimore’s inadequate transit has been discussed in this space many times before.
Baltimore isn’t unique among predominantly Black cities saddled with higher car insurance rates. Detroit and New Orleans are among the urban centers with documented ills in this arena, too. But Maryland isn’t Michigan or Louisiana, this is a politically progressive state that claims to care about civil rights and where elected leaders have expressed a desire not only for racial justice but for a more prosperous Baltimore. What if reducing the impact of territorial rating increases car insurance rates for drivers who do not live in the city? Is that any different from boosting city schools with state tax dollars to help offset historic discrimination? It would certainly be cheaper. A legislative analysis pegs the cost to suburban drivers to as little as $54 annually.
The insurance industry has a lot of clout in Annapolis, and their representatives have defeated reform measures in the past. But if 2021 is the year of addressing racial and economic disparity, perhaps the time has finally come to set car insurance rates more on how you drive and less on where you live.
The Baltimore Sun editorial board — made up of Opinion Editor Tricia Bishop, Deputy Editor Andrea K. McDaniels and writer Peter Jensen — offers opinions and analysis on news and issues relevant to readers. It is separate from the newsroom.