Homeowners insurance ‘redlining’ demands scrutiny, report says 

Homeowners in predominantly Black and Hispanic neighborhoods are disproportionately impacted by high homeowners insurance premiums, costing them hundreds of dollars more per year on average and potentially tens of thousands of dollars more over the lifespan of a mortgage, according to a new Consumer Federation of America (CFA) study.

The study, which draws on a proprietary dataset acquired from Quadrant Information Services in August 2024, includes 216,151 test quotes across 32,978 residential ZIP codes based on insurer filings in every state and in Washington, D.C. The data assumes a $350,000 replacement value, an average credit score and a 20-year-old home. This, CFA said, allows for like-to-like comparisons between ZIP codes.

Using data from the U.S. Census Bureau's American Community Survey, the study classified ZIP codes as majority Black, Hispanic or white based on which racial or ethnic group had the greatest share of households in that area.

Disparities along racial lines

Homeowners in majority Black communities pay a 16% higher premium on average, or about $500 more per year, compared to homeowners in majority white communities while homeowners in majority Hispanic communities pay a 30% higher premium on average, or about $950 more per year, the study found.

Over the course of a typical 30-year mortgage, that can result in homeowners in majority Black areas paying $15,000 more on their insurance premiums and $28,500 more for homeowners in majority Hispanic areas.

These gaps make it more difficult for people in Black and Hispanic communities to afford housing and build generational wealth, the report's authors noted. In the absence of insurance company policy changes to correct this redlining by overcharging, the CFA suggested state regulators take action.

"Buying insurance is required of every homeowner with a mortgage, which creates a special obligation on policymakers to scrutinize this market," said Douglas Heller, director of insurance at the CFA and the report's co-author, said in a statement. "But this pattern of racial discrimination by insurance companies has not gotten the scrutiny it needs from the lawmakers and insurance commissioners who are supposed to protect consumers and communities."

How 'insurance redlining' happens today

Although many examples of redlining were deemed illegal in the 1960s, studies have shown that Black consumers continue to face difficulty getting insurance companies to pay their claims. The growing use of technology in determining premiums and calculating payments has also played a role in perpetuating racist treatment of the past, the CFA's report said. 

Proprietary algorithms that set insurance premiums don't always test for proxy discrimination. Disparate impacts on communities of color often result in those communities facing higher premiums and fewer options than their white counterparts, the report noted. This tech implementation is leading to "real concerns that modern discrimination is happening in a much more technocratic and opaque manner than the map-based strategies of old," it added. 

Citing another CFA report from 2025, the consumer advocacy group noted that consumers with lower credit scores typically pay 99% more for homeowners insurance than consumers with higher credit scores. Since Black and Hispanic consumers on average have lower credit scores than white consumers due to long-term racial wealth gaps and other structural barriers, insurance credit penalties serve as a form of proxy discrimination against Black and Hispanic homeowners.

Updated guidance from the Federal Housing Finance Agency allowing federally-backed home loans to be insured with less protective coverage will also likely leave low-income homeowners and homeowners of color disproportionately underinsured in the future, the CFA said. Less coverage can lead to prohibitively expensive home maintenance and can cause low- and moderate-income homeowners to ultimately lose homes due to compounding repair needs and an inability to afford them.

Stark differences across the country

Racial gaps in homeowners insurance premiums exist across the country but are wider in some states than in others, the report found.

Premium gaps along racial lines are driven by differences in place instead of home construction, types of coverage, environmental risk and home age, according to the CFA's dataset. This is largely because insurance companies use territorial pricing, which typically uses specific ZIP codes or census tracts to gauge community-level risks.

The report identified Michigan, Pennsylvania, New Jersey, Massachusetts and New York as the five states with the largest premium gaps when comparing majority Black and majority white ZIP codes. Michigan and Pennsylvania have particularly large gaps, with homeowners in majority Black communities paying $1,768 and $1,048 more per year — or 74% and 57% more — respectively.

Meanwhile, homeowners in Hispanic majority communities face the biggest insurance premium differences in Florida, New York, Washington, Massachusetts and Kansas. Florida tops the list, with the average premium costing $5,014 more per year, or 58% more, in predominantly Hispanic neighborhoods than in white neighborhoods.

What lawmakers can do

The CFA said its estimates are likely lower than in actuality because the data it used comes from official rate filings and does "not account for all the ways in which homeowners may experience insurance discrimination, such as in their interactions with agents or in the handling of claims." To help eliminate these cost gaps, the CFA suggested lawmakers take three main courses of action:

• States should ensure insurance companies comply with fair housing laws through rating model testing to determine if pricing algorithms lead to unfairly higher premiums for people of color. Companies that are not in compliance should be prosecuted, the CFA said.

• States should prohibit insurers from using ZIP codes or smaller geographic territories when setting premiums to reduce disparate impacts.

• Like the Home Mortgage Disclosure Act database, which requires lenders to report annual mortgage data to help combat discrimination, insurers' transaction-level data should be made public on an annual basis.