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home / insurance / in the media

Los Angeles Times
Dec 05, 1999

by John M. Glionna

State Farm Suit Seeks Return of Data Critics Say Indicate Redlining

State Farm Insurance is suing the state and a former Texas insurance commissioner for the return of information it claims is proprietary but which critics say confirms a long-standing contention that the company underserves poor communities across Los Angeles County.

The figures suggest that State Farm has few or even no agents doing business in many poor and minority areas, primarily in the inner city, that have been designated by the state as "underserved communities" because of their high number of low-income residents and uninsured drivers.

The information for the company covers underserved communities statewide.

In a hearing scheduled for Monday in San Francisco County Superior Court, State Farm lawyers will argue that the state Department of Insurance mistakenly released data that detail the company's business strategies, including the placement of its agents.

Insurance economist David Birnbaum, who lives in Austin, Texas, released the information to consumer groups that made the data public, according to the lawsuit.

State Farm sued after Birnbaum refused requests made by both the company and the state to return the data and supply the names of people to whom he had supplied the information. The company last week received a temporary injunction against Birnbaum not to release the information to anyone else, setting up Monday's hearing.

"They have leaked trade-secret data out in the public domain and we want it back," said State Farm spokesman Bill Sirola. "As far as our business is concerned, it's like somebody just published the formula for Coca-Cola. It's that serious."

Doug Heller, a spokesman for Santa Monica-based Foundation for Taxpayer and Consumer Rights, which released the State Farm data to the media Saturday, said the company's coverage placement of its agents is discriminatory.

"They're redlining," he said, referring to an illegal practice of drawing a line on a map and refusing to do business in the highlighted area. "How can State Farm be a good neighbor if they won't even be a neighbor in California's lower-income communities?"

State Farm, according to the data, has only 48 agents in poor, ethnic minority communities, representing only 2.6% of the company's 1,840 agents statewide.

In Los Angeles County, the company has agents in only 28 of the 82 ZIP Codes considered by the state to be underserved. Thirty-nine of those underserved ZIP Codes are in Los Angeles, most in urban neighborhoods, according to the data released Saturday.

Sirola denied any suggestion that the company's coverage policies are discriminatory.

"It's patently ridiculous and we reject it outright," he said. "We write more policies in underserved communities than any other company in the state of California. Just the idea that we aren't serving every community in California is ludicrous."

Sirola said the company's insurance agents are independent contractors who locate their offices where they please, and that those locations are not dictated by the company.

"Having said that, if you look at the data, you'll see that there is no ZIP Code in poor areas statewide that does not have a State Farm agent within two miles," he said. "But we don't have to be located in an area to write policies there."

In August, Birnbaum contacted the state Department of Insurance for information on State Farm, which by law must supply such data to state regulators.

Saying it had made the release in error, department officials asked that the information be returned. Birnbaum refused, saying it was public information.

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