FOR IMMEDIATE RELEASE CR MONDAY, MARCH 10, 1997 (202) 616-2777 TDD (202) 514-1888 NATIONWIDE INSURANCE COMPANY REACHES $13 MILLION SETTLEMENT WITH JUSTICE DEPARTMENT WASHINGTON, D.C. Nationwide Insurance will invest more than $13 million in up to ten communities and change some of the ways it underwrites and markets homeowners insurance to ensure that minority neighborhoods get equal access to insurance, under an agreement reached today with the Justice Department. The agreement, filed today in U.S. District Court in Columbus, Ohio, resolves allegations that the fifth largest provider of homeowners insurance in the nation made homeowners insurance unavailable or available on less favorable terms in minority neighborhoods. It stems from cooperative discussions initiated by Nationwide during a Justice Department investigation, and for the most part incorporates insurance practice reforms already planned by the company. "When concerns were raised over its policies, Nationwide came to the Justice Department to work them out," said Attorney General Janet Reno. "Today's agreement brings Americans of all backgrounds closer to the dream of owning a home, nationwide." Under the agreement--the most comprehensive settlement ever reached with an insurance company under the federal Fair Housing Act--Nationwide will: inspect the condition of a home to decide if it should be covered, instead of simply refusing coverage because the home is too old or falls below a certain value; no longer require a home's market value to be a minimum percentage of the total cost of replacement; not place any geographic restrictions that bar homeowners insurance in minority neighborhoods; increase insurance coverage through targeted advertising and community outreach; train its employees about the need to treat applicants without regard to race and monitor their performance through testing; and, provide $2.2 million in each of the next six years to up to ten cities where Nationwide primarily conducts business to assist homebuyers in minority neighborhoods with down payments, closing costs, below market mortgage loans, second mortgages, and home ownership counseling. "The reality for most people is that to buy a home, you need a mortgage, and to get a mortgage, you need homeowners insurance," noted Isabelle Katz Pinzler, Acting Assistant Attorney General for Civil Rights. "Without an equal shot at getting this insurance, the American Dream of owning your own home is just that, a dream." In a suit filed together with the agreement, the Justice Department said the company violated the federal Fair Housing Act by using certain rules regarding the age and value of a home. It said that Nationwide's rules that a home cannot be insured if it is above a certain age or below a certain value were not supported by economic considerations. These rules effectively barred coverage in minority neighborhoods where homes are typically older and undervalued, in part due to discrimination in the real estate market. In large part, because of these rules, the complaint asserts the company restricted the neighborhoods in which homeowners policies could be offered based on the racial or ethnic composition of the area and instructed its agents to avoid doing business in minority neighborhoods. State Farm, Allstate and American Family Insurance previously changed these policies following complaints under the Fair Housing Act. "Insurers should make decisions based on risk, not race," said Reno. "This settlement ensures that homeowners of equal risk, regardless of race or ethnic origin, will enjoy equal access to homeowners insurance." Under today's agreement, which must be approved by the court, the Columbus-based company will continue establishing "outreach" offices, including opening offices in 15 cities over the next 6 years. The offices will conduct targeted advertising and public education programs to increase market penetration in primarily minority urban areas. Such offices already exist in San Antonio and Chicago and, by the end of the year, new offices will open in Philadelphia, Cleveland, and Baltimore. "Without insurance, damaged homes in urban areas go unrepaired and the neighborhood suffers," added Pinzler. "The community investment funding will help reverse the downward spiral by helping low- and moderate-income families buy homes in these neighborhoods." The $13.2 million in community investment will be administered by two community groups, the Local Initiative Support Corporation (LISC) and the NeighborWorks Network. In 1995, the Justice Department reached a similar agreement with American Family Insurance Company in Milwaukee. Sales agents there accused management of telling them not to write policies to blacks. The cases against State Farm and Allstate were resolved by the Department of Housing and Urban Development. # # # 97-102