Will The Fed’s “Disparate Impact” Ruling Threaten The Insurance Industry,Too?

disparate-impactRecently, in February of this year, the US Department of Housing and Urban Development (HUD) published their Disparate Impact Rule as an amendment to the Fair Housing Act.

What is the doctrine of Disparate Impact? It is a practice that can be considered discriminatory and possibly illegal regardless of intent. If such a practice is seen to adversely impact the members of a protected class such as minorities (for example Women or African Americans) it can be seen as having a disparate impact on that class.

Under the new ruling, an individual or a company can be held liable, not just for outright discrimination, but for any practice that is seen as having such an impact regardless of whether there is any evidence the individual or company intended to discriminate! To date, we’ve already seen cases where lenders, real estate brokers, and financial service firms have been sued by the US Dept. of Justice for actions or practices alleged to have a “Disparate Impact Ruling".

As an aside, please refer to my related article entitled, HUD’s New “Disparate Impact” Ruling Is Bad News For Both Lenders AND Realtors.

This begs the question of how such a ruling might effect the insurance industry. Consider the following scenarios:

• There are circumstances under which pregnant women might find it difficult to obtain life insurance as a result of potential complications during pregnancy and childbirth. Note that women are just one such “protected class” under federal law. Does this mean that pregnant women as individuals, a group, or the Department of Justice on behalf of these women, might bring a “disparate impact” suit against life insurance carriers?

• Life insurance carriers legally and legitimately have the right to “discriminate” between who they will and will not consider for insurance based on age, health issues such as high blood pressure, cholesterol, or a history of certain diseases. What happens if an individual with a family history of Sickle Cell Anemia, for instance, wants to obtain life insurance? This disease is genetic and, therefore, it is inherited and is found most predominantly amongst African Americans and people of African descent. Here again, note that African Americans are considered a “protected class” under federal law. Does this mean that an individual now has the right to sue a life insurance company for charging this “protected class” higher rates?

• Similarly, automobile insurers historically charge young male drivers higher insurance rates based on statistics illustrating their higher susceptibility to accidents based on their inexperience. Here, again, age is a “protected class” under federal law, so does this mean a change in the availability and pricing of auto insurance for all individuals should this be seen to have a “disparate impact” on young drivers? Another rating tool used by auto insurers is garaging location. Certain geographic areas reflect higher theft potential. Should any of these neighborhoods coincidentally reflect a high population of minorities, how might this effect the availability for people living in these areas?

We all agree that intentional and malicious discrimination is vile under any circumstances. However, the examples indicated above illustrate no malicious intent to discriminate based on race, age or sex and, yet, they could conceivably be cited for just such discrimination under the “disparate impact” rule.

Only time will tell whether or not my fears are groundless or whether the continuous stream of federal laws we see today, will have predictable “unforeseen consequences” resulting in adverse effects for the very “classes” the laws were intended to protect in the first place.

Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist, and a published author. His interviews include Blog-Talk Radio, Newsday, the Daily News and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and their appreciation by recommending their friends and family members in need of mortgage, real estate and financial guidance
Warren’s Email: wgoldberg@mortgagewealthadvisors.com
Website: www.mortgagewealthadvisors.com

No Comments Yet.

Leave a comment

I have been with Petschauer Insurance for a long time. My account executive Lori Halloran is like family to me: she is always there when I need her and is very knowledgeable and understanding. I wouldn’t go anywhere else for my insurance needs.
Vincent Falcone
From the first time I spoke with Lori Halloran at Petschauer Insurance, I knew she was a special person. She is a woman that conducts herself professionally, with compassion and full knowledge of all types of insurance Petschauer has to offer. While speaking with her, as she explained and answered all of my questions, I felt like I was speaking with family…which is another way to describe this company. She has a way of making very confusing decisions so simple and easy to understand. I even added another insurance policy to my two renewal policies because of her. My last renewals could have been processed via mail but I really wanted to take the time to drive and meet this wonderful woman face to face. She greeted me with this huge beautiful smile, which matched her personality perfectly. So, I just had to go back another time just to say “Hi” and bring her flowers in appreciation for all her help and also celebrate a new friendship. The Petschauer “Family” has been there for me since my first policy when I was 19 years old, and now I’m a “senior”. I’ve been with them forever and don’t plan on going anywhere else. Thank you Lori for your dedication and to the rest of the Petschauer staff.
Jane Deitlein
I have had the pleasure of working with various members of the Petschauer Team, both personally and professionally for 20+ years. And I couldn’t have done it without them. They go above and beyond. Heidi, Narima, Sherri and LuAnn don’t just bring to us the products they offer, they help me to understand the specifics and evaluate what makes the most sense for me, my family and my employees. I always feel I have a better understanding of an industry I have no understanding of so that I can evaluate the offerings in a smart way, cost effective way. They are proactive with renewals, allowing us the time to do our due diligence, evaluate our plans to be sure we’re properly covered and are always there to listen and help with special circumstances. Their kindness, caring and willingness to lend an ear when needed, really makes them stand apart from the rest. Heidi and her family have built a beautiful culture at Petschauer and I highly recommend them to anyone I meet.
Jamie Stedman-Novo
I have worked with various individuals at Petschauer and have found each to be responsive, courteous, and thoughtful. Each year, the contact for my auto policy proactively seeks new bids and has consistently saved me money on my policy.
Ryan Huber
Quality attentive service is hard to find, but at Petschauer Insurance that’s what you can expect from their always friendly staff . It’s what we’ve experienced for all these many years.
John from Forest Pork Store Inc.
Petschauer is great. I never had a problem.  They always call me back. Fabulous employees who are always willing to help.
Marty Bruno
I have been with Petschauer Insurance for over twenty five years. The staff is knowledgeable and professional. Petschauer writes both my personal and commercial insurance and they provide excellent counseling. I truly trust the firm and their staff. Thank you.
Mike Matonti
Spence-Chapin has had the pleasure of working with the wonderful John Petschauer, Inc. for 15+ years. They have always provided excellent service to us–with great knowledge, expertise, and patience — even in the most challenging situations. There has not been one time when they have not been immediately accessible to us, even at a moment’s notice. We thank them for their work and celebrate their 60th anniversary, while looking forward to working with them for another 60 years and beyond!
Spence-Chapin
Excellence in customer service and it’s a one stop shop for all my insurance needs.
Tom Haines
My family and I are long time personal and business clients of Petschauer Insurance. We sincerely appreciate your responsiveness and the quality of service that Petschauer provides. We have recommended your company to others because of our satisfaction with your service. We look forward to doing business with you for years to come.
Greg Weiss