Financial institutions play a critical role in determining the viability of urban communities. As is the case with the geographic distribution of mortgage and business loans, insurance redlining constitutes a major force in fueling the uneven development of metropolitan areas. This article examines the racial effects of insurance underwriting activity in a large midwestern metropolitan area. In analyzing the distribution of homeowners insurance policies, a strong bias in favor of suburban and white neighborhoods and against inner-city and minority communities was found. These patterns reflect both discriminatory nonrational economic behavior on the part of insurers and the logic of rational market processes. Policy recommendations are offered to address the problems inner-city neighborhoods confront in efforts to secure adequate insurance and other financial resources.
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