From Redlined Maps to Algorithms, Price Discrimination, and Bluelining: How Insurance Exclusion Happens Today
As our climate crisis intensifies, insurance companies are increasingly picking winners and losers in who can still afford home insurance and homeownership. Insurance costs are eating up growing shares of household budgets. Between 2021 and 2024, premiums rose in 95 percent of ZIP codes. More and more homeowners are now underinsured or uninsured. Communities of color are significantly more likely to be uninsured or underinsured, with 22 percent of Native American homeowners, 14 percent of Hispanic homeowners, and 11 percent of Black homeowners being completely uninsured as compared to 6 percent of white homeowners.
While the climate-driven insurance crisis is recent, the playbook of exclusionary insurance underwriting is nothing new. Today’s crisis is preceded by insurance companies’ historical redlining practices. This blog details the little-known 1960s urban insurance crisis and highlights its parallels in contemporary insurance exclusion – such as through credit-based insurance scoring, the use of algorithms and artificial intelligence (AI), and bluelining, where companies categorically withdraw services from communities they perceive to have high measures of environmental risk, to better understand today’s insurance crisis and how to prevent a history’s repeat.
The 1960s Insurance Crisis and Redlining
Redlining refers to the discriminatory practice of excluding neighborhoods of color from credit or insurance access. While most people are familiar with mortgage redlining, historically, insurance companies also discriminated against Black homeowners and neighborhoods.
Property insurance redlining first got national attention in the 1960s. At that time, urban neighborhoods across the country experienced widespread white flight, as white residents sought out new homes, jobs, and racially segregated schools in the suburbs. Insurance companies followed suit, and many refused to underwrite insurance in what they saw as “blighted” urban neighborhoods. Most residents who remained in these neighborhoods were Black, and they often faced difficulty finding insurance or were charged a higher rate. Racism shaped this urban insurance crisis, as insurance companies often and sometimes openly deployed racial stereotypes about neighborhoods and individual homeowners as a shorthand for risk.
When urban rebellions of the 1960s caused unrest, insurance companies threatened to pull out of impacted neighborhoods altogether. President Johnson convened the National Advisory Commission on Civil Disorders, a national taskforce that extensively researched drivers behind and solutions to this crisis, including the insurance crisis in cities. The resulting Hughes report concluded that racial discrimination was one of the drivers behind uneven insurance access, and argued:
“Communities without insurance are communities without hope.”
Faced with the prospect of cities with impossible futures, Congress passed a 1968 bill that authorized states to run Fair Access to Insurance Requirements (FAIR) plans that created state-backed insurers of last resort programs and offered riot reinsurance to insurance companies that participated. Implemented by 26 states, these insurance plans were structured after earlier local solutions, such as the Boston Plan offered in the Roxbury neighborhood as early as 1960. FAIR plans continue to exist today as state-backed insurers of last resort, offering insurance options to those excluded more commonly based on natural disaster risk, rather than on redlining.
That same year, Congress also passed the Fair Housing Act, which made it illegal to use race to make mortgage or home insurance decisions. The disparate impact standard under the law further specified that unequal treatment of protected classes was illegal, even without proof of intentional bias. While insurance companies have long alleged that the Fair Housing Act does not apply to them, dozens of fair housing settlements and verdicts have shown otherwise. For example, in 2000 Nationwide Mutual Insurance Company settled a landmark case with HOME Virginia, in a lawsuit that alleged that the company had used racial profiling and systematically denied homeowners insurance in predominantly minority communities in Richmond.
Today’s Insurance Crisis: Bluelining and Algorithm-Based Exclusion
Nowadays, new types of redlining and exclusion are being felt by communities and homeowners across the country. Price discrimination remains key to the insurance business. Rather than bluntly drawing lines on maps, insurers today use proprietary algorithms, which often include hundreds of individual, property, and neighborhood factors to price insurance. These include not only climate risk, and the age and square footage of the home, but also features like ZIP code and homeowners’ credit score. Companies are also starting to adopt AI-branded tools in underwriting and claims processing, including “machine learning, computer vision, natural language processing, and automation,” such as when they use drone imagery and computer vision to evaluate roofs.
High-tech, however, does not mean unbiased. For example, in what CFA has called the “credit penalty,” property insurance companies charge the typical homeowner $1,996 more each year (almost double) just for having a lower credit score than their otherwise identical neighbors. Insurance companies do not extend credit: if consumers stop paying their premiums, their coverage ends. Moreover, as a type of proxy discrimination, this pricing practice disproportionately impacts Black and Hispanic homeowners, who tend to have weaker credit histories due to the racial wealth gap and persistent structural barriers.
Notably, companies generally do not disclose their algorithms to the public, nor are the resulting underwriting decisions, claims, and pricing disclosed publicly. This lack of transparency makes it nearly impossible for consumers to hold insurance companies accountable, or to identify unfair underwriting and exclusion.
In addition to opaque pricing, increasingly insurance companies withdraw from communities altogether. So-called bluelining is a practice where financial institutions, including banks, credit facilities, and insurance companies, categorically withdraw services from communities they perceive to have high measures of environmental risk. Bluelining is different from redlining, as its geographic exclusion is not directly based on race. Nonetheless, bluelining is happening in the footsteps of historical redlining and its legacies.
Insurance companies are at the forefront of bluelining today, effectively making determinations about which communities remain insurable. Historically redlined neighborhoods, long deprived of investment, now face higher exposure to climate hazards. Summer temperatures are also an average of five degrees hotter in these communities, an effect driven by the lack of trees and the abundance of heat-trapping pavement, consequences of decades of infrastructure neglect.
Preventing a Repeat of History
As insurance companies and lenders increasingly factor climate risk into business strategies, the implications extend beyond property insurance. Without insurance, homes cannot be mortgaged; without mortgages, homeownership declines, property values plummet, and neighborhood disinvestment accelerates.
In February 2025, Federal Reserve Chair Jerome Powell warned the Senate Banking Committee about this potential reality in the near future,
“So what that’s going to mean is that if you fast-forward 10 or 15 years, there are going to be regions of the country where you can’t get a mortgage, there won’t be ATMs, the banks won’t have branches and things like that. That’s a possibility coming up down the road.”
To confront the legacy of insurance redlining and emerging contemporary forms of insurance exclusion, policymakers can draw from proven strategies used to combat redlining in banking and home lending. CFA and The Greenlining Institute have extensively written and advocated for these tools, including:
- Require insurance companies to publicly disclose data on pricing, underwriting, and claims by census tract, mirroring the transparency required in the mortgage industry.
- States should enact Community Reinvestment Acts for insurers, compelling them to invest in climate resilience and risk reduction in the communities most affected by climate change.
- States should more tightly apply the Fair Housing Act and its disparate impact standard on insurance companies, and outlaw the unfair use of proxy discrimination, such as pricing home insurance based on credit scores.
These reforms can finally hold insurers accountable, while closing the gaps that have left historically redlined and climate-vulnerable communities underprotected and at risk.
