Last week, the Big “I” sent a letter to the Department of Housing and Urban Development (HUD) in response to a proposal to amend a 2013 rule implementing the Fair Housing Act’s disparate impact standard.

The rule in question extends disparate impact liability—instances where neutral policies have a negative impact on a protected group—to the sale and service of homeowners insurance, among other issues.

Reconsideration of the 2013 rule is the result of a 2015 U.S. Supreme Court decision that disparate impact claims are subject to certain constitutional limitations. In its letter, the Big “I” noted that the disparate impact standard set forth in HUD’s 2013 rule appears to conflict with that decision. 

The Big “I” also raised concerns that the rule as applied to homeowners insurance violates the McCarran-Ferguson Act. McCarran-Ferguson generally leaves regulation of the “business of insurance” to the states, but the rule conflicts with state laws that require rates to be based upon actuarially sound factors that are predicated on risk. In other words, the rule inserts consideration of race and other protected characteristics into a previously blind underwriting process.

Finally, the Big “I” noted that the rule exposes insurance agents and brokers to unwarranted liability risks by requiring insurers and their sales force to obtain and store personal and potentially sensitive information about an individual’s protected class(es), when previously they generally did not collect this information. 

Jennifer Webb is Big “I” federal government affairs counsel.