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Disparate Impact Rule

Federal regulator targets risk-based insurance pricing

By Robert Detlefsen | Updated on April 24, 2012

Last November, the U.S. Dept. of Housing and Urban Development (HUD) proposed a new rule permitting agencies the use of disparate-impact analysis to prove allegations of illegal housing discrimination under the Fair Housing Act. HUD listed the provision and pricing of homeowners’ insurance as one housing-related activity to which the disparate-impact standard would apply. How would the rule’s adoption affect homeowner insurers and consumers?

Let’s begin with some history: Congress enacted the Fair Housing Act in 1968 to prohibit housing discrimination based on race, religion, gender, familial status or ethnicity. The law was meant to put an end to restrictive covenants, in which homeowners’ groups agree not to sell their homes to certain minorities. Likewise, the law prohibited landlords from refusing to rent apartments to people based on race, gender, et al., and prevented lenders from denying home mortgage loans or charging higher interest rates on the basis of these characteristics. Congress assigned HUD the task of enforcing the Act. 

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