State Farm accused of covert racial discrimination in claims processing
A Black Illinois homeowner claims State Farm practices covert racial discrimination in how it processes claims.
“State Farm does not treat its Black and white homeowners insurance policyholders equally,” states a federal lawsuit filed by Jacqueline Huskey of Matteson in south suburban Chicago.
The filing claims the Bloomington-based company uses computer algorithms that have the effect of disproportionately delaying claims of African American homeowners. White homeowners were almost a third more likely than Black homeowners to have their claim processed expeditiously — in less than a month. It alleges the company is 39% more likely to ask for additional information from Black homeowners.
“We take this filing seriously. This suit does not reflect the values we hold at State Farm,” said a State Farm statement.
Huskey said State Farm repeatedly delayed assessing hail damage to her house, forced her to provide additional information, and declined to pay part of the claim for external damage to the home. The lawsuit alleges Huskey is far from alone.
Huskey's lawyers said they based their case for systemic racial discrimination on a study of more than 800 State Farm policyholders in the Midwestern states of Illinois, Indiana, Michigan, Missouri, Ohio, and Wisconsin. The Center on Race, Inequality, and the Law at New York University School of Law did the survey and analysis.
“Claims made by Black homeowners are disproportionately subjected to greater suspicion than claims made by their white counterparts: State Farm is more likely to request additional claims documentation from Black claimants and Black claimants must have more interactions with State Farm employees to resolve their claims,” according to the lawsuit.
The center declined a WGLT request for an interview, citing the litigation. The filing in the northern district of Illinois asks for class action status.
“Inequitable practices such as these make it more difficult for Black homeowners to build wealth through home ownership at the same rate as white homeowners,” alleges the suit.
Attorneys claimed the study shows the difference in the rates the company asks Black and white homeowners to provide extra information about is less than 1% likely to be random chance. Longer claims processing time for Black customers is less than 5% likely to be by chance, according to the study. The lawsuit alleges State Farm's data mining of information such as physical appearance, genetics, geo-location, social media presence, and browser search history, functions as a proxy for race. The case also claims historical housing and claims data used by State Farm are "infected with racial bias."
“State Farm’s claims processing methods have a demonstrable and widespread discriminatory impact on Black homeowners making insurance claims, in violation of the FHA,” asserts the lawsuit.
The practices, the suit contends, contribute to societal difficulties Black people have in creating intergenerational wealth, financial security, and preservation of home values. The case suggested State Farm is far from alone in use of computer machine learning programs that fail to be even-handed.
“In recent years, algorithmic decision-making has produced biased, discriminatory, and otherwise problematic outcomes in some of the most important areas of the American economy. ... These harms are often felt most acutely by historically disadvantaged populations, especially Black Americans and other communities of color,” according to a comment by Federal Trade Commissioner Kelly Slaughter that is referenced in the court filing.
Other figures cited in the lawsuit laid out a landscape tilted against Black families.
“In 2020, 73.7% of white families owned homes, compared to only 44% of Black families,” found economists at Freddie Mac in 2020, that continued, "12.5% of homes in majority Black areas are appraised below the price agreed upon by the buyer and seller, compared to just 7.4% of homes in majority-white areas.” f.
Researchers also have determined that relative to their home value, Black homeowners pay higher mortgage rates, spend more on mortgage insurance, face a higher share of maintenance costs, and pay more in property taxes than white homeowners, resulting in a higher home ownership cost burden.
“State Farm is committed to a diverse and inclusive environment, where all customers and associates are treated with fairness, respect, and dignity. We are dedicated to paying what we owe, promptly and courteously,” said the company.