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Race, Redlining, and Automobile Insurance Prices

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  • Harrington, Scott E
  • Niehaus, Greg

Abstract

Following G. Becker's (1993) suggestion that tests for discrimination should attempt to infer whether profits differ for products sold to minorities and nonminorities, this article tests the hypothesis that racial discrimination affects market prices of auto insurance in Missouri. Compared with tests for discrimination in lending markets, the authors' results are less susceptible to bias from omitted variables. Controlling for available demographic and coverage-related factors, they do not find that loss ratios at the zip-code level are negatively related to percent minority population. This finding is inconsistent with the hypothesis that racial discrimination increases premiums relative to expected claim costs for minorities. Copyright 1998 by University of Chicago Press.

Suggested Citation

  • Harrington, Scott E & Niehaus, Greg, 1998. "Race, Redlining, and Automobile Insurance Prices," The Journal of Business, University of Chicago Press, vol. 71(3), pages 439-469, July.
    • Handle: RePEc:ucp:jnlbus:v:71:y:1998:i:3:p:439-69
    DOI: 10.1086/209751
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    Cited by:

    1. Xiao Lin & Mark J. Browne & Annette Hofmann, 2022. "Race discrimination in the adjudication of claims: Evidence from earthquake insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(3), pages 553-580, September.
    2. Meng, Jie & Layton, Roger & Huang, Yimin, 2016. "Why do some consumers shop in this pharmacy? A cross-check of vulnerable characteristics and store types," Journal of Retailing and Consumer Services, Elsevier, vol. 30(C), pages 116-130.
    3. Michael S. Gutter & Charles B. Hatcher, 2008. "Racial Differences in the Demand for Life Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 677-689, September.
    4. James R. Garven, 2002. "On the Implications of the Internet for Insurance Markets and Institutions," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 5(2), pages 105-116, September.
    5. Helen I. Doerpinghaus & Joan T. Schmit & Jason Jia‐Hsing Yeh, 2008. "Age and Gender Effects on Auto Liability Insurance Payouts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 527-550, September.
    6. Laureen Regan, 2007. "Unfair Discrimination and Homeowners Insurance Availability: An Empirical Analysis," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(1), pages 13-31, March.

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