Introduction
Insurance companies disadvantage minority and low-income personal injury plaintiffs in three ways. They use unfair risk classification. They use credit-based insurance scoring. And they use prior authorization that stands between a patient and treatment. Each one hits hardest the people with the least access to credit and health care.
In personal injury cases, insurance companies play a significant role in determining compensation for victims. It is now clear that these companies often treat poor and minority plaintiffs unfairly. This article looks at how insurers have been found to do that. It uses legal sources and history to show why these wrongs must be dealt with.
How have insurance companies used bad science to discriminate?
A. Bad Science and Discrimination in Insurance
In the past, insurance companies used bad science to justify unfair treatment. For example, a Prudential statistician’s efforts to prove the genetic inferiority of the black race were used to justify the company’s discriminatory policies. The public mostly accepted this math-based excuse for unequal coverage. Race was treated as just one more factor, like a job or where you live.
B. The Use of Risk Calculation to Justify Discrimination
Insurance companies have also used risk math as a tool against poor and minority plaintiffs. By labeling these groups “high risk,” insurers have justified charging higher premiums or denying coverage altogether.
How do insurance companies discriminate against injury plaintiffs?
A. Unfair Risk Classification
One way insurers treat poor and minority plaintiffs unfairly in injury cases is through unfair risk classification. In some cases, quiet forms of bias remain in access to insurance and risk classification. Ideally, rates should rest on actuarially sound estimates of expected future costs associated with each person’s risk. That means similar risks should pay the same. But race or income level can unfairly sway these classifications.
B. Why is insurance credit scoring unfair?
Insurance credit scoring is another unfair practice insurers use. It punishes people for sensible behavior, such as shopping around for insurance. It hits low-income and minority plaintiffs hardest, since they may have less access to credit or lower credit scores.
C. How does prior authorization interfere with medical treatment?
Insurance companies may also interfere in medical treatment through the practice of “prior authorization”. This process requires a doctor to obtain approval from the insurance provider before administering specific treatments or medications. This interference can disproportionately affect minority and low-income plaintiffs who may have limited access to healthcare and rely on insurance coverage for essential treatments.
What laws address discrimination in insurance?
A. The Commerce Clause
The Commerce Clause of the U.S. Constitution (Article I, Section 8) authorizes Congress to regulate commerce with foreign nations and among the several states. This clause has traditionally been interpreted as a source of Congress’s regulatory power over the U.S. economy, which includes the insurance industry.
B. Legal Challenges and Policy Reforms
Regulators, state lawmakers, and members of Congress have worked to fight bias in insurance. Their work has ended many forms of direct unfair discrimination. But the quieter forms of bias that remain in risk classification and access to insurance are still a problem.
C. Potential Legal Remedies and Policy Changes
Several legal remedies and policy changes could curb unfair insurer practices in injury cases. These may include: Stronger anti-bias laws and rules, so risk classifications rest only on actuarially sound factors, not race, ethnicity, or income level. A ban on using credit scores to set insurance rates or coverage, since this hits hardest on minority and low-income plaintiffs. Tighter oversight of what insurers do, including prior authorization and other ways they meddle in medical treatment.
Conclusion
Insurers treat poor and minority plaintiffs in injury cases unfairly. That is a hard fact. History, risk classification, credit scoring, and meddling in medical care all add up. These groups often have a harder time getting fair compensation for their injuries. Legal sources and history show that more must be done. Stronger anti-bias laws, a ban on credit scores in setting rates, and tighter oversight of insurers would help. With those changes, we can work toward a fairer insurance industry for all.
Related reading: delay and denial tactics used on low-income claimants.
Frequently asked questions
What is insurance discrimination?
Insurance rates are supposed to rest on actuarially sound estimates of expected future costs, so similar risks pay the same. Insurance discrimination happens when race, ethnicity or income level shapes those classifications instead. Plaintiffs labeled “high risk” can end up paying higher premiums or being denied coverage altogether. The burden falls hardest on minority and low-income people after an injury.
What is an example of unfair discrimination in insurance?
Here is one from history. A Prudential statistician tried to prove the genetic inferiority of the black race. That bad science was then used to justify the company’s discriminatory policies. The public mostly accepted it and treated race as just one more factor, like a job or where you live. Regulators and lawmakers have since cut back that kind of direct bias. But quieter forms remain in risk classification and access to insurance.
What are some examples of unfair practices in insurance?
Three stand out in personal injury cases. Unfair risk classification lets race or income influence who is rated “high risk.” Insurance credit scoring punishes people for sensible behavior like shopping around. It hits those with less access to credit hardest. Prior authorization makes a doctor get the insurer’s approval before certain treatments. That delays care for people who depend on that coverage.
What can be done about insurance discrimination?
The fixes start with law and oversight. Anti-bias rules can require that risk classifications rest only on actuarially sound factors, never race, ethnicity or income level. Credit scores can be barred from setting insurance rates or coverage. Regulators can watch insurers more closely, including prior authorization and other meddling in medical care, so injured plaintiffs get fair compensation.
Medically reviewed by Dr. Gurpreet Singh Padda, MD, MBA, MHP — Board Certified in Anesthesiology, Pain Medicine, Interventional Pain Management, Addiction Medicine, and Obesity Medicine.
