By Michael P. Tremoglie
There was a time when America’s inner cities were redlined for insurance. No carrier wanted to write there. Producers certainly did not want to work there.
The difficulties inner city businesses were having acquiring property and casualty insurance were a result of their unique environment. Exposure to theft, vandalism, assault of employees, civil disturbances, credit worthiness, and a deteriorating infrastructure hampered their acquisition of P&C insurance. It became so bad that the government stepped in and enacted laws and policies designed to make insurers write business in the inner city.
Eli Lehrer, president and co-founder of R Street, a public policy free-market think tank in Washington D.C. said, however, that times have now changed.
“The (inner city) market was very unstable at one time,” he said. “There may have been a lot of arson, property crime in general, and violent crime. But violent crime is way down and property crime has fallen even more. Inner city businesses obtaining insurance do not face the obstacles they did thirty years ago. I do not have sense that there is a big problem.”
Lehrer noted that a grocery store would be unlikely to insure against shoplifting anyway. Such losses are usually factored into the price of the merchandise. Generally speaking the inner city is, in some ways, not a bad place to do business.
“Percentages of property crime claims are not that great,” Lehrer added. “Vandalism is more common in the inner city but in the overall scope of things it is not that great a cost. But on the other hand, if you look at hurricanes and tornadoes – these occur outside of the inner cities and cause more damage.”
A long time P & C insurance producer, speaking on background, confirmed what Lehrer said. He observed that in the current market businesses are not going to see a huge problem because of a one-time thing like a riot – such as happened in Ferguson, Missouri last year. He said natural disasters are more of an issue, and emphasized he’d rather write a building in the inner city of Chicago than in the cornfields of Illinois. A building in a desolate area where the nearest volunteer fire department is miles away and there are no hydrants is more of a risk than an inner city building where the fire departments are excellent and fire hydrants are plentiful.
