just insert this, as a point of interest, was nearly 100 percent of
the African-American race, and I wrote a lot of that business.
Mr. Johnson obviously did not approve of this type of business.
In July that same year, 1989, I was called to the State director's
office by Jerry Cutsforth. He told me behind closed doors, along
with my district manager, which I am certain he would have very
select memory when it came to asking him if he could verify this,
because he is still an employee of the company, however, behind
these closed doors, he told me, quote, he did not like this kind of
business that I was getting through referrals, through dealerships,
and through the Yellow Pages.
Once again, his quote was, "We don't like this kind of business."
He then went on to advise me that he was trying to save my job.
This business that Jerry Cutsforth did not like was 99 percent
Other examples of American Family's lack of production on the
north side of the city of Milwaukee consists of not accepting a
homeowner's application back in October 1990 from my office be-
cause there were some shingles missing, and I remember vividly,
on the northwest comer of the building. Maybe less than a half a
dozen shingles were missing. The property was on the north side
of town and it was denied. Not given the opportunity to replace the
shingles, not given the opportunity to update the home, just flat-
out canceled, not accepted.
My contract was terminated by Johnson and Cutsforth on No-
vember 30, 1990. I was told by Lucchesi and Cutsforth the morning
of November 26, 1990 at approximately 9:20 a.m.
The two of them walked into my office, and within 2 minutes
they had taken my career and tossed it after 17 years of loyal serv-
ice only because they felt I was writing too much business from the
north side of Milwaukee. Of course, they will probably tell you
I should have been entitled to a review hearing per company
guidelines. My experience in the past, if I can just insert this, any
agent who has requested a hearing in the past after any type of
termination has been granted this hearing.
I sent a two-page letter, item number 2 in my report here, to
Jack Chopp, who was the chairman at the time of the board of ap-
peals. My two-page letter was answered with a four-line paragraph
telling me that the termination would stand without a hearing,
which is item number 3.
At the time that Mr. Cutsforth told me of not liking this type of
business, I was leading the State in American Standard business
and production, which once again consisted of a good percentage of
the business from the dealerships and from the Yellow Pages,
which consisted of approximately 99 percent of the African-
When I was terminated on November 1990, I was one of the
leading agents in the company. As a result of my position ending
in 1990, my income dropped 67 percent. I had to remortgage my
home, sold my car, my daughter was unable to return to college
due to lack of funds, and my marriage ended in May.
As of January 1991, James Johnson's position had been replaced
by a new regional vice president, so he had announced his retire-
ment in October, and through the understanding of some company
people, it was his intent to end my contract before he retired.
A couple of last comments pertaining to insurance agents. The
State of Wisconsin's fair dealership law excludes insurance
agents — number 4 — which means that there is a fair dealership
law in the State of Wisconsin that a company cannot come into
your place of employment, your business, your franchise, and just
decide to quit allowing you to write business through them.
Insurance agents are not part of this dealership law, which I feel
probably should be addressed at some point in time in the future,
and the largest lobbyist of this particular part of this program is
the insurance industry itself. They don't want to give their agents
this latitude, that they cannot come into their office at any point
in time and cut your contract,
I would like to thank each and ever>' one of you for taking time
out of your busy schedules and taking the time to allow me to tes-
tify and give you this testimony. I thank you very much.
[The prepared statement of Dale Latus can be found in the
Chairman Barrett. Thank you very much. I appreciate you tak-
ing the time to appear with us today.
Next we will call on Eric Englund. Mr. Englund is president of
the Wisconsin Insurance Alliance. The alliance represents 41
Wisconsin-based property and casualty insurers in Wisconsin, in
the Wisconsin legislature and before administrative agencies.
Mr. Englund, I am happy to have you here this morning and I
look forward to your important testimony.
STATEMENT OF ERIC ENGLUND, PRESIDENT, WISCONSIN
Mr. Englund. Thank you. Congressman Barrett. It is a true
privilege for me to appear before you today. We miss you in Madi-
son, but we are pleased that you are representing us now in
I am the president of the Wisconsin Insurance Alliance, a trade
association of property and casualty insurance companies that are
domiciled here in Wisconsin, and on behalf of those companies,
Congressman Barrett and subcommittee staff, we appreciate the
opportunity to express our views.
Let me say first of all from the outset that to the Wisconsin in-
surance industry, there are few words more despicable or ugly than
being called a racist or racism, and from an insurance perspective,
it has no place in the multitude of activities that make up the pric-
ing, sales, or service of our products, be they homeowners' insur-
ance, auto insurance, workers' compensation insurance, or small
business property and casualty insurance.
In preparation for this very short appearance before you today,
I have taken the time to review the transcript of past testimony be-
fore your subcommittee, and while that testimony certainly rep-
resents a diversity of opinion, previous speakers from the insurance
industry have discussed in detail the nature of the property and
casualty insurance mechanism and how it strives to price, sell, and
service its product in a way that is color blind.
I won't repeat that testimony, but instead attempt to specifically
address the three questions you raised to me in your kind letter of
First of all, vou asked for my views on the availability, aflford-
ability, and adequacy of insurance in minority neighborhoods in
Milwaukee. Here is my report.
Homeowners' insurance is available, affordable, and adequate for
all but the most degenerated and dilapidated housing units in Mil-
waukee and is color blind. I know that that statement flies in the
face of those who consistently criticize our industry in this arena,
but I believe, Congressman Barrett, that the facts are there and I
strongly encourage you, your staff, and the subcommittee staff to
take a look at the facts and figures.
In fact, I feel so strongly on this point, I will repeat myself.
Homeowners' insurance is available, affordable, and adequate for
all but the most degenerated and dilapidated housing in Milwau-
kee's inner city. I have attached to my testimony today a very
thoughtful study that documents this conclusion.
Auto insurance is available and adequate in minority neighbor-
hoods in Milwaukee, but as Congressman Barrett is fully aware, it
is becoming a problem in terms of affordability. This problem of af-
fordability is associated with the frequency and severity of claims
occurring in those neighborhoods.
The cost of insurance in those neighborhoods can be three times
as high as some of the rural portions of our State when we are
talking about auto insurance, and it is of growing concern to both
inner-city residents and the insurance industry.
We have examined the numbers associated with this pricing and
find that the pricing of auto insurance in the inner city is in direct
relationship to higher risks and higher claims and is not a function
The variety of property and casualty workers' compensation in-
surances that are necessary for small businesses in minority neigh-
borhoods are available, affordable, and adequate.
With that fairly positive report, I must also note some concerns.
There are two subsets of problems that adversely affect the avail-
ability and affordability of insurance for those living in urban
neighborhoods and cause what Jesse Jackson has termed illusory
racism in our industry. Those subsets break down into societal
issues and insurance issues.
The societal issues are those that seem to grace the front pages
of our newspaper and be the lead stories in the electronic media
on a daily basis. The tragedies of human behavior in the urban
centers, be it with guns, drugs, carjacking, or other types of anti-
social behavior, convert to increased insurance claims, which con-
vert to higher premiums for those who live in those neighborhoods.
These societal misbehaviors do cause many of our products to be
priced higher in urban areas than in suburban or rural areas.
Please keep in mind that insurance by definition charges more for
its product where claims are higher.
The challenge to our society is to focus on the real issues that
include police response time, arson, gangs, guns, random violence,
theft, and other tragedies that appear to more and more confront
contemporary society, especially urban areas. Until we turn the
comer in confronting those problems, there will be a differentiation
in the cost of some of the products that are sold by the insurance
industry in urban America.
A second subset of challenges are those that are point specific to
the property and casualty insurance industry in Milwaukee. Those
challenges include further education of underwriters regarding
urban markets, further scrutiny of State-mandated ZIP Code data,
which analyzes marketshare participation by major writers in the
homeowners and auto markets, continued consumer outreach, edu-
cating people regarding insurance and their rights as consumers,
continued monitoring of minimum limit practices by insurance
companies relative to the sale of homeowners' insurance, and fur-
ther evaluation of the evolution of auto insurance rating territories
to determine whether there are better public policy alternatives to
the status quo.
You also asked that I speak to whether or not redlining exists
in the insurance industry in Milwaukee. Congressman Barrett, I
have spent 10 years trying to understand how this industry prices,
sells, and services its products, and racism is not a common de-
Institutionally, the Wisconsin property and casualty insurance
industry does not discriminate on the basis of race. It discriminates
on the basis of risk, and as I previously indicated, that type of law-
ful discrimination is the heart and soul of the insurance industry.
Don't get me wrong — there are racists in the insurance industry,
just like there are throughout society. It is the insurance industry's
challenge to continue to evolve in ridding itself of those individuals
who cast such an ugly pall over all of us.
But that is different. That type of individual behavior exists
throughout contemporary society and does not reflect institutional
behavior on the part of the insurance industry.
Third, you asked for information regarding the application of the
Federal Fair Housing Act to the Wisconsin insurance industry. As
you have indicated, there have been some recent court decisions ap-
plying that Federal statute to the insurance industry.
Previously, our industry was under the impression that this spe-
cific Federal act did not apply to us. Frankly, whether or not this
act applies appears to have little to do with what is happening here
Why? As Attorney Hall has already indicated, for decades Wis-
consin has had laws making it illegal for insurance companies to
discriminate on the basis of race. Those prohibitions against race
discrimination contained in the Wisconsin statute are the essence
of the Federal Fair Housing Act.
In other words, Wisconsin has had laws on the books which pre-
cede and echo the application of the Federal Fair Housing Act to
the insurance industry.
You also asked me to discuss what Wisconsin insurers are doing
to make certain that laws making it illegal to discriminate on the
basis of race in this industry are understood by their employees.
While there is no uniform procedure, I can tell vou that among
both the major and minor writers of property ana casualty insur-
ance in this State, there are daily endeavors with underwriters,
with agents, with claims staff and others, to work to make sure
that our actions are related to risk, not race.
In conclusion. Congressman Barrett, I will acknowledge to you
that it's with a certain amount of sadness that I appear before you
today. My sadness is generated by what I believe is a phenomenal
disparity between the rhetoric and misperception of many of our
critics and the reality of how we function.
No matter how hard this industry tries, that ugly and despicable
adjective of racist is hung around our neck. This industry, espe-
cially here in Milwaukee, can look with pride at a number of initia-
tives, including the 15-year operation of the Community Insurance
Information Center, efforts to recruit and maintain minority
agents, efforts to understand and respond to community needs, the
active depopulation of our plan, our support of legislation creating
fire escrow accounts, and requiring insurers to provide specific rea-
sons for cancellation as positive efforts to remove this ugly charge.
Despite those efforts, this charge persists.
The sadness in my testimony comes from the counterproductive
way in which cries of racism stop people from working together.
Stripped naked, the insurance industry exists to sell and service in-
surance. Old or young, rich or poor, white or black, urban or rural,
we will take your money, we will cover your risk, and we will pay
As previously indicated, there are some extraordinaiy issues in-
nate to urban living which provide extraordinary challenges. We
sincerely believe that here in Milwaukee, you will find the com-
petence, credibility, and desire on the part of the property and cas-
ualty insurance industry to continue to speak to those issues, and
we look forward to the day when the rhetoric is less inflamed and
the parties more willing to work together.
Congressman Barrett, subcommittee staff, redlining is not a
problem in Milwaukee, Wisconsin. The problem is the way in which
the verbiage of racism impedes the evolution of additional practical
solutions to problems that are inherent in urban living.
[The prepared statement of Eric Englund cap be found in the
Chairman Barrett. Thank you for your testimony, Mr. Englund.
Our next witnesses are Bill Tisdale and Carla Wertheim, execu-
tive director and associate director respectively of the Metropolitan
Milwaukee Fair Housing Alliance.
Mr. Tisdale is currently in his fifth term as president of the Na-
tional Fair Housing Alliance. Governor Tommy Thompson has ap-
pointed him to serve as a public member of the Wisconsin Legisla-
tive Council's Special Committee on Fair Housing Legislation.
Ms. Wertheim has served as a consultant for the U.S. Depart-
ment of Housing and Urban Development, the U.S. Department of
Justice, the Wisconsin Equal Rights Division, and the Kentucky
Commission on Human Rights. She also conducts seminars in test-
ing and the enforcement of State and Federal fair housing laws.
Mr. Tisdale and Ms. Wertheim both teach racial and ethnic rela-
tions at the University of Wisconsin, Milwaukee.
Thank you both for being with us today. Please proceed.
STATEMENT OF BILL TISDALE, EXECUTIVE DIRECTOR, MET-
ROPOLITAN MILWAUKEE FAIR HOUSING COUNCIL; ACCOM-
PANIED BY CARLA WERTHEIM, ASSOCIATE DIRECTOR,
METROPOLITAN MILWAUKEE FAIR HOUSING COUNCIL
Mr. Tisdale. Thank you, Congressman Barrett. It is a pleasure
to be here today.
We will briefly state our oral testimony. Some of the points that
we have raised in our testimony have been covered by both Attor-
ney Hall and some of the other speakers.
At this point, we would like to introduce ourselves. I am the ex-
ecutive director of the Fair Housing Council, Metropolitan Milwau-
kee Fair Housing Council, and with me is Carla Wertheim, the as-
Our organization is a private nonprofit community-based organi-
zation. We are actually membership based. We operate throughout
five counties: Milwaukee, Waukesha, Washington, Ozaukee, and
Racine. And it is a pleasure to talk about something in fair housing
other than advertising cases, which people, through the media
lately, think that that's the only thing that we do, is advertising.
Fortunately, we have an opportunity here to talk about an issue
that also plagues the Milwaukee area, and in response to Mr.
Englund, the issue here, as we understood it, is not an issue of rac-
ism, but one of discrimination, and you can discriminate without
being racist, and discrimination in this area is illegal.
Discrimination in the area of insurance, the applicability of poli-
cies, the availability, the accessibility, are what we are here to talk
about today, and we are not here talking about individual acts of
racism, but discrimination and how that impacts Milwaukee citi-
zens, in particular minority citizens in the Milwaukee area.
We have been asked to speak to the same issues regarding avail-
ability, accessibility, also the practices and manifestations of insur-
ance redlining in Milwaukee, which Carla will talk about, and also
the importance of H.R. 1257, the Insurance Consumer Protection
Act of 1993.
In evaluating the accessibility of insurance coverage, it is dif-
ficult to assert that homeowners' insurance is unavailable to minor-
ity residents of Milwaukee as the Wisconsin Insurance Plan [WIP]
was created to provide insurance coverage to those who could not
obtain it in the private market.
WIP and other types of FAIR plans are widely recognized insur-
ance pools of last resort for those persons who are unable to buy
insurance in the regular market. These types of programs have
policies that generally cost iriore and provide less coverage than
conventional homeowners' policies.
A 1993 study of insurance availability conducted by the Amer-
ican Insurance Association concluded that about 98 percent of
homeowners have insurance coverage.
We are not here to talk about that from the standpoint of what
is available, but the quality. That also includes a number of indi-
viduals who are in the WIP plan, the Wisconsin Insurance Plan, so
the 98 percent that is available includes the WIP figures, and those
figures represent three times the number of blacks than whites
wno participate through some kind of FAIR plan. So it is a dis-
proportionate number of minority residents, minority individuals,
who are thrown into this insurance pool, and the likely question is,
why can't these homeowners obtain insurance on tne voluntary
We also need to look at what are the factors or criteria that in-
surance companies are using which disqualifies these homeowners
for conventional insurance, and are these homeowners getting com-
parable insurance at comparable rates, and if not, why not?
Carla will talk a little bit, at this time, about some of the actual
examples of insurance redlining Mr. Englund does not think exists
in the Milwaukee area, and from that point, we will close.
Ms. Wertheim. Based on academic studies and litigation activity
and our own complaint and investigation activity, it is clear to us
that a geographic and racial bias exists in the provision of insur-
ance in the Milwaukee area.
Two cases I would like to briefly highlight occurred in 1992. One
involved an African-American man who was seeking insurance for
his home that is located in an integrated part of the northwest side
of Milwaukee. He contacted an insurance office on the predomi-
nantly white south side of Milwaukee and an agent, after finding
out the location of his property, told him that she would not be able
to assist him, but referred him to a black agent who was located
in the racially integrated part of the northwest side of Milwaukee.
Yet, a few days later, a white woman whose home is in a pre-
dominantly white neighborhood in the northwest side of Milwaukee
called that same agent on the south side and that agent gave her
a verbal and written quote and provided insurance — offered to pro-
vide insurance coverage to her.
The question is, why wasn't that agent willing to offer service to
the black individual who had called earlier, and it is clear to us
that this is an example of differential treatment based on either
the race of the person applying for insurance or the racial composi-
tion of the neighborhood in which they live.
A second example involved a woman who lived in the city of Mil-
waukee and she was attempting to find replacement cost coverage
for her home that is in the city of Milwaukee. The agent advised
her that he was unable to provide such coverage to her because she
lived in the city of Milwaukee and said if she moved a few miles
west into the all white suburb of Brookfield, he could provide that
kind of coverage to her.
Our question is, are homeowners really given the full range of
housing options when they have to begin to take into account will
they be able to get adequate or better coverage depending on where
they choose to live, and don't these practices then run contrary to
the mandates of the fair housing law that dictate free choice and
expanded housing opportunities?
Mr. TiSDALE. It should be noted that limits to access and/or cov-
erage of insurance has a deleterious effect on an individual's oppor-
tunity to purchase a home.
All of these things are inextricably linked. Restricted coverage
and exorbitant costs unfairly punish inner-city residents.
Mr. Englund talked about homeowners' insurance not being
available in areas where there is dilapidated housing. That plays
right into the urban blight, plays right into disinvestment. Finan-
cial services are withdrawn. The area declines. People from the
public and private sector are unwilling to reinvest in those kinds
of areas. The cycle continues, as Mr. Hall alluded to. Insurance is
an important link in this whole process.
When Mr. Englund talked about the level playing field or color
blind issues, that is great up until the point the color sightedness
ended. It makes a big difference to start out on a level playing field
when you are starting all of a sudden from a color blind standpoint.
It is great if we all had the same opportunities from the beginning.
Those individuals who live in areas which cannot be covered with
insurance or live in areas where the insurance costs more — they
are put into a pool — suffer the consequences of just being seg-
regated in this community.
The issues that we are concerned about are that we work
together on this, and it is not a matter of finger pointing at the
insurance industry, it is not a matter of finger pointing at the lend-
ing industry or the real estate industry; all of us got into this prob-
lem together. We all got into this problem from the standpoint of-
fer whatever reasons. The issue is how do we resolve the problem,
how do we get out of it, and I think hearings of this type provide
information from both sides.
The information that is being provided to us from complainants
and clients assist us in seeing what kinds of practices are out Inhere
and if, in fact, they do violate fair housing laws or regulations by
the insurance industry, that the industry is covered.
Carla would just in closing make some recommendations related
to this particular issue and then we will be available for questions.
Ms. Wertheim. We urge the passage of a comprehensive insur-
ance disclosure bill similar to the Home Mortgage Disclosure Act,
which regulates practices of the lending industry, and we have out-
lined the reasons we believe the Disclosure Act to be important in
We concur with Attorney Hall that such a comprehensive bill
should be permanent, have nationwide applicability, and include
disclosure of the race and gender of the applicant. We also concur
that reporting by census tract will provide more precise analysis of
Mr. TiSDALE. That concludes our testimony. Thank you very