What is ‘Redlining’ with Auto Insurance?

Redlining auto insurance is a practice where insurance companies charge higher rates to certain neighborhoods and classes of people, usually based on race. Redlining with auto insurance is illegal, but you may still experience higher rates based on where you live and the color of your skin. Enter your ZIP code below to get a free auto insurance quote so you know what you should be paying for auto insurance, and do NOT work auto insurance companies who continue to practice redlining.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Insurance Feature Writer Rachel Bodine

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Jun 6, 2022

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When researching car insurance, you will occasionally come across the term ‘redlining’. Auto insurance companies may be accused of redlining, for example, or a certain community might face higher insurance prices due to redlining.

What is ‘redlining’ with auto insurance? Does redlining still occur today? Is redlining illegal? Today, we’re explaining everything you need to know about redlining and car insurance.

What is Redlining?

Redlining is a term used in the United States and Canada. Essentially, it refers to the practice of charging higher insurance prices to certain neighborhoods or communities, often within a racial context.

A car insurance company might be accused of selectively raising insurance prices for a low-income neighborhood, for example. Or, a health insurance company might be accused of denying coverage to a person of a certain race. Some home insurance companies have been accused of charging higher insurance prices to certain ethnicities.

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Where Does the Term ‘Redlining’ Come From?

The term redlining was first coined by sociologist John McKnight in the 1960s, who noticed that banks in America would avoid investing in certain neighborhoods in certain cities. Banks, for example, would not invest in predominantly black inner-city communities.

Banks and insurance companies would have maps of the cities they served. They would draw red lines around certain ZIP codes. These zones indicated areas where agents were prohibited from writing policies. That’s where the term ‘redlining’ comes from.

In some cases, insurance companies would totally refuse to sell insurance policies in a redlined community. In other cases, insurance companies would sell the same insurance policies but with significantly higher premiums.

In the 1980s, redlining gained nationwide attention when investigative reporter Bill Dedman published a series of articles showing that banks would lend money to lower-income rights but not to middle-income or upper-income blacks. Dedman received a Pulitzer Prize for his work titled, “The Color of Money: Home Mortgage Lending Practices Discriminate Against Blacks”.

Today, redlining continues to occur. Typically, redlining occurs in the denial of financial services like banking and insurance. health insurance companies may be accused of redlining, and so can car insurance companies.

There’s also something called ‘reverse redlining’. Some lenders and insurance companies will target predominantly non-white communities, charging them more for ordinary services.

Essentially, redlining refers to the idea that a car insurance company would deny one applicant but accept another applicant in a similar situation. A car insurance company might accept a white driver from a white community with three DUIs but deny a driver from a black community with a clean driving record.

Does Redlining Still Occur Today?

Insurance companies will tell you that redlining no longer occurs. They will claim it’s a thing of the past. They will claim that insurance companies are prohibited from considering race or ethnicity when selling car insurance policies. Car insurance companies that use race or ethnicity when pricing premiums will face lawsuits.

In practice, however, some drivers will face effects similar to redlining.

Insurance companies are prohibited from using race or ethnicity when calculating car insurance prices. They are not, however, prohibited from using your ZIP code to calculate insurance premiums.

Today, insurance companies will look at the crime rate and accident rate of your ZIP code to calculate your insurance premiums. Technically, they’re not using race or ethnicity in this calculation. However, when certain ZIP codes are 90% African-American or another race, this practice can quickly appear to be based on race.

Meanwhile, some reports indicate that racially-based redlining continues to exist. In a report titled, “Redlining or Risk” published in 2007, two UCLA professors found that insurance companies calculate insurance premiums differently in low-income minority neighborhoods, and the different prices could not be justified by crime or claim rates. The study looked at white communities with similar crime and claim rates and found that insurance companies charged significantly lower prices than black communities with similar claims rates.

On average, drivers in low-income, black neighborhoods paid an average of $154 more in car insurance than drivers in higher-income or white neighborhoods. Only 11% of this gap was attributable to risk, according to the report.


Ultimately, redlining is a term coined in the 1960s to refer to the practice of racially discriminating customers when selling car insurance. Insurance companies would draw a red line around certain ZIP codes on a map and prohibit their agents from selling car insurance within those communities.

Today, it’s illegal for car insurance companies to use a person’s gender or ethnicity when calculating car insurance premiums. However, it’s not illegal for a car insurance company to use someone’s ZIP code when calculating insurance premiums. Insurance companies will tell you that they exclusively use the claim rate and crime rate of that ZIP code to calculate insurance premiums. Certain research, however, indicates that redlining may still exist in car insurance.

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