©The Journal of Risk and Insurance, 2001, Vol. 68, No. 4, 581–614 581 URBAN HOMEOWNERS INSURANCE MARKETS IN TEXAS: A SEARCH FOR REDLINING Robert W. Klein Martin F. Grace ABSTRACT There has been a continuing debate in Texas and other states about the avail- ability and cost of home insurance to residents of inner city and minority neighborhoods. Consumer and community advocates contend that insur- ers engage in redlining, or unfair discrimination against minority areas, by charging excessive prices and limiting the supply of insurance. Unfortu- nately, insurance redlining allegations have been largely based on simple comparisons of minority and nonminority areas that do not consider the influence of other factors. In this article, the authors build on a more rigor- ous vein of research by using econometric analysis to identify measurable factors that affect urban homeowners insurance markets. While this study cannot conclusively prove or disprove the presence and negative effect of unfair discrimination, it assesses whether significant statistical evidence exists for such behavior. The authors conclude that no statistical evidence of redlining exists and that the risk of loss and the demand for insurance ap- pear to primarily drive the terms of insurance transactions. This conclusion implies that measures directed toward enhancing safety and bettering eco- nomic conditions offer the best prospects for improving urban insurance markets. INTRODUCTION Problems with the availability and cost of home insurance in urban communities and allegations of industry “redlining” practices have received considerable political atten- tion and generated an intense policy debate. This 40-year debate has progressed as urban communities and industry practices have evolved. Charges of explicit racial discrimination have changed to allegations of implicit unfair discrimination against minor- ity areas caused by certain industry marketing, pricing, and underwriting methods. Robert W. Klein is associate professor and director of the Risk Management and Insurance Department at the J. Mack Robinson College of Business of Georgia State University, Atlanta. Martin F. Grace is professor of risk management and insurance and legal studies, associate director of the Center for Risk Management and Insurance Research, and holder of the James S. Kemper Professorship in the Risk Management and Insurance Department at the J. Mack Robinson College of Business of GSU.