Homeowners in predominantly Black and Hispanic ZIP codes are paying noticeably higher insurance premiums, a new report from the Consumer Federation of America shows.
Study finds sizable premium gaps tied to race
The analysis, based on 216,151 test quotes across 32,978 ZIP codes, compares premiums for a $350,000 home with an average credit score and a 20‑year‑old structure. Using U.S. Census data to label ZIP codes, the report says homeowners in majority‑Black neighborhoods face premiums that are about 16% higher—roughly $500 more each year—than those in majority‑white areas. In majority‑Hispanic zones, the increase rises to roughly 30%, or $950 extra annually.
Over a typical 30‑year mortgage, these differences translate into an additional $15,000 in insurance costs for Black‑majority residents and nearly $28,500 for Hispanic‑majority homeowners.
State‑by‑state gaps vary. Michigan and Pennsylvania show the largest disparities for Black‑majority ZIP codes, with premiums $1,768 and $1,048 higher per year respectively. For Hispanic‑majority areas, Florida tops the list, where premiums average $5,014 more annually than in white neighborhoods.
How algorithmic pricing fuels “insurance redlining”
The organization attributes much of the disparity to modern pricing algorithms that draw on historical data reflecting past discriminatory practices. These proprietary models often do not test for proxy discrimination, allowing higher rates to persist in communities of color.
Credit scores also play a role. A separate study from 2025 linked lower scores to premiums nearly double those paid by consumers with higher scores. Because Black and Hispanic households typically have lower average credit scores—a legacy of long‑standing wealth gaps—credit‑based pricing effectively serves as another layer of indirect discrimination.
Recent guidance from the Federal Housing Finance Agency, which permits federally backed mortgages to be insured with less protective coverage, could further expose low‑income and minority homeowners to under‑insurance, raising the risk of unaffordable repairs and potential loss of homes.
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From a practical standpoint, the upward pressure on premiums makes it harder for families in these neighborhoods to sustain homeownership, a key avenue for building wealth across generations. The added expense can force households to allocate more of their limited budgets to insurance, leaving less for maintenance, upgrades, or savings.
Policy recommendations and next steps
The report proposes three actions for state regulators and insurance commissioners. First, it urges testing of rating models to ensure compliance with fair‑housing statutes, with non‑compliant insurers facing prosecution. Second, it recommends banning the use of ZIP codes or similar small‑area geographic identifiers when setting rates, aiming to curb disparate impacts. Third, it calls for public disclosure of insurers’ transaction‑level data on an annual basis, mirroring the Home Mortgage Disclosure Act’s transparency requirements for lenders.
Douglas Heller, director of insurance at the group and co‑author of the study, said, “Buying insurance is required of every homeowner with a mortgage, which creates a special obligation on policymakers to scrutinize this market. But this pattern of racial discrimination by insurance companies has not gotten the scrutiny it needs from the lawmakers and insurance commissioners who are supposed to protect consumers and communities.”
While the CFA’s figures rely on official rate filings, the organization notes that the actual impact may be larger because the data does not capture discrimination that could occur during agent interactions or claims handling.
Consumers and advocacy groups are watching closely, hoping that the suggested reforms will prompt a reevaluation of how risk is measured and priced. If insurers adjust their models to remove geographic proxies, the premium gap could shrink, easing the financial burden on homeowners of color.
The gap persists.
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