Lawsuit filed against State Farm says insurance company neglected Black customers
Based on an analysis of how State Farm manages certain claims, the lawsuit is the first to use company data to show racial bias.
State Farm is the subject of a class-action lawsuit filed last week in Illinois federal court following accusations the insurance provider neglected and discriminated against its Black customers.
According to The New York Times, more than 800 people participated in a survey from Deborah Archer, director of the Center on Race, Inequality and the Law at the NYU School of Law, and the Fairmark Partners law firm. The study spanned nine months in 2021 and was supported by YouGov, a polling and data analytics company.
Based on an extensive analysis of how the insurer manages certain claims, the lawsuit — representing named and unnamed clients in six states in the Midwest — is the first to use company-specific data to reveal racial bias.
According to Archer, the study revealed that State Farm’s Black policyholders had to submit more documentation and deal with claims adjusters more frequently than its white policyholders before the insurer would agree to pay them.
Black consumers had a 20 percent higher likelihood of needing to speak with a State Farm agent at least three times before getting their claims approved. Additionally, they were considerably more likely to be required to submit additional paperwork. Most white clients required fewer than three encounters before receiving approval for their claims. They were one-third times more likely to have their claims paid out in under a month.
A whistleblower claims company managers have singled out Black areas as sites where there is “a lot of fraud.”
Jacqueline Huskey, a Black woman from suburban Illinois, made more than a dozen attempts to contact State Farm for assistance after a hailstorm punctured holes in her roof on June 12, 2021.
She said a State Farm adjuster came to her house on a “kind of” windy day around six weeks later, on July 22, 2021, but he wouldn’t go up on her roof to check for damage.
“He stated to me: ‘Oh, I’m not going up there. I’ll just assess the damage that’s inside the home,'” Huskey recalled, The Times reported.
During a second visit weeks later, Huskey said, an employee from an unaffiliated business claimed it was unclear whether the leaking roof was to blame for the problem.
She was unsatisfied with the results and made repeated calls to State Farm, claiming they passed her from one employee to another.
“Kyle, Keith, Ross, so many people I could hardly keep up,” Huskey said, according to The Times. “It went on from June to October of 2021, and still nothing was taken care of.”
Huskey calculates that she has dealt with State Farm between 20 and 30 times since filing the claim. She and her husband, a former AT&T technician, ultimately paid $7,000 of their own money to renovate their house, with the $4,687 check from State Farm covering only a portion of that cost.
Like many of its competitors, State Farm uses specialized technology businesses to assist in processing some claims. To describe how the system works, the lawsuit used one of those companies, Duck Creek Technologies, as an example.
Duck Creek utilizes software from FRISS, an artificial intelligence startup, to flag submitted insurance claims for suspected fraud. FRISS reportedly runs the data of each insurance policyholder through its computer systems, evaluating the customer’s profile and the claim’s wording to generate a “risk score.”
Each score is determined by factors such as crime data, social media data and “demographic data about the neighborhood, such as the degree of urbanization,” as stated by FRISS.
“The term ‘urbanization’ is in the dictionary of dog whistles,” Archer said, according to The Times.
“When you’re looking at these algorithms and the inputs, it’s often the same poison in a different bottle,” she added. “We’re importing existing racism.”
The attorneys initiating the complaint against State Farm contend that FRISS’s procedures are only disguising outdated racial discrimination strategies under a veneer of technology, far from eliminating racial bias from the process.
“We take this filing seriously,” said State Farm spokeswoman Gina Morss-Fischer, The Times reported. “This suit does not reflect the values we hold at State Farm. State Farm is committed to a diverse and inclusive environment, where all customers and associates are treated with fairness, respect, and dignity. We are dedicated to paying what we owe, promptly and courteously.”
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