Our Positions | Disparate Impact Rule

On November 16, 2011, the Department of Housing and Urban Development proposed significant changes in the implementation of the Discriminatory Effects Standard in the Fair Housing Act, which prohibits discrimination against any person in "the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin." The proposed rule reset existing standards for determining when a housing practice with a discriminatory effect violates the FHA and discussed liability standards where a facially neutral housing practice has a prohibited discriminatory effect.

HUD issued a final rule on February 8, 2013, to formalize the national standard for determining whether a housing practice violates the FHA as the result of discriminatory effect. The Final Rule released by HUD codified the use of "disparate impact" analysis to prove allegations of unlawful discrimination with regards to homeowners' insurance. This meant that any factor used by insurers to assess risk could be challenged if it produced statistically disproportionate outcomes among demographic groups.

The rule would apply in situations where there was no intent to illegally discriminate, and where all policyholders and applicants for insurance were subjected to the same underwriting and pricing criteria without regard to race, ethnicity, or any other prohibited characteristic. It is also important to note that unfair discrimination issues relating to insurance have traditionally been addressed by state regulators, as federal law establishes insurance regulation under the jurisdiction of the states.

NAMIC and the American Insurance Association successfully challenged HUD in federal court. Judge Richard Leon of the US District Court for the District of Columbia vacated the Rule nationwide in 2015. This was a complete victory for NAMIC at the District Court level.

However, on June 25, 2015, the Supreme Court upheld the application of disparate impact under the FHA in a surprise five-to-four decision in the case of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. This SCOTUS decision overruled NAMIC's victory in Federal District Court.

On November 17, 2015, an amended complaint continued the industry's challenging of the rule, arguing that as written it exceeds the narrow limitations for disparate impact claims the Supreme Court established in its ruling. On April 14, 2016 Judge Leon granted the industry's motion to amend the complaint and return the case to his court.

As of July 2017, the matter is still before the U.S. District Court for the District of Columbia awaiting argument and disposition.

NAMIC Position

NAMIC has led the opposition to this rule from the onset. While NAMIC vehemently opposes illegal discrimination, this rule is not supported by any existing cases, is duplicative of current state prohibitions, ignores the basic mechanics of pricing and providing insurance, and would seriously disrupt the ability of property and casualty insurance companies to assign risk on objective and relevant factors.

NAMIC News on the Disparate Impact Rule


Erin Collins
Senior Vice President - State and Policy Affairs