Urban Insurance Issues

Underwriting, the task of deciding what risks to insure, allows insurers to discriminate between good and bad risks. Differences in prices for insurance must reflect expected differences in losses and expenses. When the risk of future losses increases or when rates are inadequate, insurers become more selective about the degree of risk they will assume in an effort to preserve their profit margin. However, redlining, defined as refusal to issue or renew, or cancel an insurance policy based on the geographic location of the structure or individual to be insured, is illegal in every state.

Because losses tend to be higher in urban areas, rates for auto and home insurance are often higher than average in inner cities. This has raised questions about the availability and affordability of insurance in urban communities. Responding to these concerns, the insurance industry is redoubling its efforts to enhance the insurability of inner city properties and to push for changes in auto insurance that would enable drivers to have more coverage options.