Fair Housing Advocates Call on Indiana Insurance Commissioner to Reject Sale of PRUPAC to Liberty Mutual


News Release      Contact:  Shanna L. Smith
Monday, October 6, 2003    (202) 898-1661
       Contact Richmond:  Constance Chamberlin
       (804) 354-0641
       Contact Toledo:  Lisa Rice
       (419) 243-6163
       Contact Philadelphia:  Jim Berry
       (610) 604-4411
       Contact Milwaukee:  William R. Tisdale
       (414) 278-1240

WASHINGTON, DC - The National Fair Housing Alliance (NFHA) today petitioned the State of Indiana Department of Insurance to reject the sale of Prudential’s Property and Casualty Division (PRUPAC) to Liberty Mutual Insurance Company because the terms of the purchase will perpetuate PRUPAC’s discriminatory practices and policies identified in federal litigation by NFHA and fair housing agencies in Richmond, VA, Toledo, OH,  Philadelphia, PA and Milwaukee, WI.  The fair housing agencies also contend that Liberty Mutual will acquire legal risks by purchasing PRUPAC’s book of business and agreeing to utilize Prudential agents to sell exclusively Liberty Mutual’s homeowners policies.

“Liberty Mutual is knowingly buying a book of business already packed with policies that discriminate against African American and Latino homeowners.  Our testing information and a review of the company’s practices indicate that PRUPAC’s policies for African Americans, Latinos, and homeowners in minority neighborhoods provide inferior coverage and are priced higher than those sold to whites because of discriminatory underwriting policies and practices.  This deal calls for Liberty Mutual to retain and renew PRUPAC’s policies for up to seven years, thereby locking African American and Latino homeowners into less desirable and more costly policies,” said Shanna L. Smith, president/CEO of NFHA.

In its Form A filing with the Indiana State Department of Insurance, Liberty Mutual describes a “unique distribution agreement” in which Prudential agents will sell exclusively Liberty Mutual’s homeowners products.  The fair housing groups object to this unique distribution agreement.

“According to the Form A filing, Liberty Mutual can only provide “product-specific” training to Prudential agents through its subsidiary, Helmsman Insurance, Inc.  Liberty Mutual cannot require training on the Fair Housing Act or require Prudential agents to follow the policies and practices Liberty Mutual instituted following the resolution of a 1998 fair housing lawsuit,” said Constance Chamberlin, President/CEO of Housing Opportunities Made Equal (HOME) of Richmond, VA. 

The Form A filing clearly states that Helmsman Insurance, Inc. will provide product-specific training to Prudential Insurance Brokerage, Inc. trainers, who will then in turn train the Prudential Authorized Agents.  Helmsman may not distribute training materials directly to agents.  Helmsman Insurance also was not trained under Liberty Mutual’s prior fair housing training program.

“Liberty Mutual has opened itself up to legal liability for any new discriminatory practices that Prudential agents engage in when selling Liberty’s homeowners insurance products,” stated Lisa Rice, president/CEO of Toledo Fair Housing Center (TFHC). “Prudential has a long history of denying homeowners insurance to people of color.  The Toledo Fair Housing Center raised these issues before HUD and the Ohio Civil Rights Commission in 1995. We resolved complaints involving Prudential in 1995 and provided training to Prudential officials designed to teach Prudential how to comply with the Fair Housing Act.  However, follow up testing and investigations by several fair housing agencies, including the Toledo Fair Housing Center, clearly demonstrated that Prudential continued to engage in the same illegal practices.  One can only conclude that Prudential never internalized this training throughout its workforce," surmised Rice.

An administrative complaint was filed in 1997 with the U.S. Department of Housing and Urban Development (HUD) alleging that Prudential Insurance Company of American and PRUPAC engage in discriminatory marketing, underwriting and pricing of policies based on the race of applicants or racial composition of neighborhoods.  After years of failed attempts to resolve this complaint and when new evidence of continuing violations was documented in Chester, PA, the fair housing organizations and African American homeowners injured by Prudential’s practices were forced to press their claims in federal district court in Washington, DC.  A lawsuit was filed in October, 2001.

“We have no confidence that Prudential has changed its discriminatory practices against African American homeowners, even after the filing of federal litigation in 2001,” said Jim Berry, president/CEO of Suburban Philadelphia Fair Housing Council (SPFHC).  “Prudential was put on notice throughout the 1990's that it should stop denying insurance or offering inferior coverage to African American homeowners.  Yet, when we tested Prudential in 1999 and 2000, we found the same illegal practices that had been uncovered in Toledo, Richmond, Milwaukee and Washington, DC,”  continued Berry.

William R. Tisdale, president/CEO of Metropolitan Milwaukee Fair Housing Council stated that, “The Indiana State Insurance Commissioner has a unique opportunity to prevent the perpetuation of discriminatory insurance practices.  If the Commissioner approves the distribution model and marketing and training provisions of this sale, then the State of Indiana will be supporting a plan that intentionally fosters illegal discrimination.  African American and Latino homeowners will be the losers in this deal.”

The facts as set forth in the federal litigation illustrate discriminatory policies and practices of Prudential Insurance Company of America and PRUPAC in its marketing, underwriting and pricing of products.  Nothing in the pending sale provides Liberty Mutual with the ability to review current PRUPAC policies for discrimination and offer appropriately priced policies as well as policies that provide the highest level of protection for African American, Hispanic and Asian American homeowners. 

“President Bush has set goals to increase homeownership rates for African Americans and Latinos.  In order to increase homeownership, we must eliminate discriminatory barriers in the sale, financing and insuring of homes.  A home is the single most important asset most of us own.   We protect this asset with homeowners insurance.  African American and Latino homeowners must be guaranteed the same opportunity as white homeowners to secure insurance that is fairly priced and provides comprehensive protection. The State of Indiana Insurance Department should reject the PRUPAC sale and send the message that illegal practices will not be rewarded or ignored because of the sale of  the company,” said Smith.

The action taken by NFHA marks the first time fair housing organizations have challenged the purchase of an insurance company before a state commission.  The National Fair Housing Alliance, HOME, TFHC, and MMFHC were plaintiffs in fair housing litigation against Liberty Mutual and Travelers/Aetna Insurance Companies.

The NFHA and TFHC also entered into a HUD conciliation agreement with State Farm Insurance Company in July, 1996, and Allstate Insurance Company resolved a HUD complaint filed by NFHA in February, 1997.  State Farm took an industry lead when it changed its underwriting standards by eliminating age and value restrictions for replacement cost coverage and opened several additional offices in urban neighborhoods.  Allstate eliminated age and value restrictions, opened many more offices in urban neighborhoods and instituted a self-testing program to monitor the behavior of its sales force.  Liberty Mutual adopted new underwriting standards, hired more African American agents, opened more offices in urban neighborhoods and engaged in self-testing programs as part of the resolution to the lawsuit.  Liberty Mutual also invested millions of dollars in community development programs in Washington, DC, Richmond, Toledo and Milwaukee.

For a copy the letter to the State of Indiana Department of Insurance and/or the federal lawsuit filed against PRUPAC, go to www.nationalfairhousing.org or send an email request to shanna1016@aol.com

Founded in 1988, the National Fair Housing Alliance is a consortium of approximately one hundred private, non-profit fair housing organizations, state and local civil rights groups and individuals from thirty-seven states and the District of Columbia.  Headquartered in Washington, DC, NFHA, through comprehensive education, advocacy and enforcement programs, provides equal access to apartments, homes, mortgage loans and insurance policies for millions of people.  NFHA is dedicated to educating the industry and community about fair housing, conducting research into the nature and extent of housing, lending and insurance discrimination, and enforcing the federal Fair Housing Act in order to increase housing opportunities for all people.