U.S. bail-bond insurers spend big to keep defendants paying

Insurance companies have spent $17 million to defeat proposals to weaken or abolish the for-profit bail industry in the United States, a system that brings insurers $15 billion in business a year, company financial statements and interviews with more than three dozens experts on criminal justice, campaign finance or bail.

The spending has jumped more than 10-fold since 2010 as insurers have led the industry’s lobbying effort, targeting laws in more than a dozen states, the analysis shows.

The industry opposition comes as President Joe Biden and other Democrats have renewed calls to dismantle what they describe as a biased system that harms mostly low-income people.

Illinois last month enacted a law to abolish cash bail by 2023, but it had already ended for-profit bail in 1963.

The insurance industry has succeeded, however, in beating back such measures in other states, allowing insurers to increase sales even as public pressure grows to reduce or eliminate cash bail. In 2019, bail insurers increased premium income by 8%, according to insurance credit agency AM Best.

(For graphics on U.S. bail bond issuance, and industry spending on lobbying and campaign contributions, see: tmsnrt.rs/3rc4nbJ and tmsnrt.rs/3d06nij)

Bail is meant to ensure people charged with crimes appear in court. Amounts range from as little as a few hundred dollars to $100 million or more. Defendants who post the full amount are freed pending trial and typically get their money back.

Those unable to afford bail can buy a “bail bond” – insurance guaranteeing that the full bail will be paid if they don’t appear for court dates. Defendants are charged a nonrefundable fee, typically 10% of the bail, by a bail agent, and often are required to pledge homes and cars as collateral. The fee is split between the bail agent and the insurer.

Insurers and bail agents say their services keep communities safe from violent criminals while protecting the constitutional right to pretrial release for the accused.

Critics of for-profit bail – which exists only in the United States and the Philippines – say it often becomes a debt trap for poor defendants, who are disproportionately minorities. Some borrow money for their bond fees from bail agents on installment plans at high interest rates. The American Civil Liberties Union said it has seen rates of about 30%. That can leave defendants repaying long after their court cases are closed.

Bail bonds are lucrative for insurance companies. The gross profit margin of bail bonds, after paying claims and related expenses but before other costs, averages 83%, compared with 33% for insurers covering autos and homes, according to the latest data from AM Best and Refinitiv.

The industry has consolidated in recent years, with the top six bail insurers now controlling 76% of the market, according to AM Best.

The largest is St. Petersburg, Florida-based Bankers Financial Corp, which generated $244 million in bail-related premiums in 2019, according to AM Best.

Through a subsidiary, Bankers is a member of an insurance industry group called the American Bail Coalition, or ABC, that uses contributions from its seven insurance company members to preserve for-profit bail. The group also uses donations from bail agents, and its efforts include online ads, media buys and political lobbying, according to the ABC, state records and social media disclosures.

“I don’t think anybody wants to give the federal government or state prosecutors more power to detain or to deny bail,” Jeff Clayton, executive director of the ABC, said in an interview.

Bankers did not respond to requests for comment. Other ABC members did not respond or referred questions to the trade group.

The coalition’s most recent success was in California, the nation’s biggest bail market, home to 3,200 bail agents and 21 bail insurers. In 2018, the state passed a law, known as SB-10, to replace cash bail with a system that would give judges – aided by a computer algorithm – discretion to decide which defendants posed a danger or flight risk. Most minor offenses would not require the assessment.

Such minor offenses, known as misdemeanors, account for about 80% of U.S. criminal cases filed annually – and thus the bulk of detention and bail decisions, said Alexandra Natapoff, a Harvard Law School professor who has studied the extent and impact of such arrests.

But California’s new law never went into effect. The ABC spent $2.8 million, raised mainly from insurers, gathering signatures for a ballot initiative that would allow voters to decide the fate of SB-10. The law’s implementation, originally scheduled for October 2019, was postponed pending the vote.

The ABC then led a campaign to urge Californians to vote “no” on the initiative, known as Proposition 25, spending more than $7 million donated by insurance and bail bond companies, according to state records.

The campaign alleged risks to public safety. It also sought to persuade Californians, particularly voters of color, that the new law would give judges too much power and that the algorithm would produce more racial bias than the current system.

The ABC-led campaign spent $102,702 on Facebook ads, according to Facebook, including a video of rapper Waka Flocka Flame that garnered as many as 450,000 screen views.

“If you truly advocate for social justice, I want you to vote ‘no’ to Prop 25,” the rapper said in the video. Through a spokesperson, Flame said he was not paid and was unaware of the video’s use on Facebook. He declined further comment.

Another ABC-sponsored ad showed Alice Huffman, then-president of the California-Hawaii unit of the National Association for the Advancement of Colored People (NAACP). Huffman in the ad said the algorithm could racially profile Black people. “The NAACP asks you to vote ‘no’ on Proposition 25,” she said.

Californians rejected the law with 56.4% of the vote on Nov. 3. Later that month, Huffman announced she would step down, citing health issues, after local media reported that the ABC campaign paid her consulting company $200,000 in 2020.

The ABC declined to comment. Huffman did not respond to requests for comment. Rick Callender, who succeeded Huffman as local NAACP president, said the organization has opposed cash bail since 2017 and “is committed to ensuring that the values and positions of the NAACP are adhered to.” He declined comment on Huffman’s stance or the ABC’s payments to her.

Several progressive groups also opposed SB-10, saying its reliance on an algorithm would perpetuate racism and give too much power to judges.

But it was the ABC, in leading the campaign to get the measure on the ballot, that preserved cash bail in California.

“Clearly, the bail bond industry sees this issue is gaining national momentum and will do whatever it takes to stop it,” said Robin Steinberg, founder and chief executive officer of The Bail Project, a national not-for-profit organization working to change the U.S. pretrial system.

The industry has also battled bail eradication efforts in Florida, Texas, Colorado, New York and other states over the past 10 years.

In that time, bail industry spending on lobbying, campaigns and candidate contributions soared to more than $23 million, from $4 million in the prior decade, according to FollowTheMoney.org, part of the nonprofit National Institute on Money In Politics.

In January 2020, a new law in New York had the effect of allowing 87% of those arrested to be released without bail or pretrial detention.

Bail and law enforcement groups claimed the measure would cause more crime, and continued to try to sway public opinion.

Among the ABC efforts was a Facebook page titled “Safer Communities.” The page is not identified as being set up and run by the ABC, though it is managed by an ABC staffer, according to Facebook.

Safer Communities also ran Facebook ads about crime and bail, including one that described New York’s law as “dangerous.”

Clayton, the ABC executive director, said his group sees the Safer Communities page as a “neutral” way to engage viewers about bail policy issues.

The tactics proved effective. Public opinion polls showed support for New York’s new system eroding.

By April 2020, New York legislators had proposed a longer list of offenses for which bail could be set, which Governor Andrew Cuomo signed. The amendments became effective in July 2020, adding 35 crimes for which judges could require defendants to post bail.

The ABC’s Safer Communities campaign continues. It is now targeting a Colorado bill that would expand on bail reform measures enacted there in 2019.

A March 11 post urged readers to “TAKE ACTION” to stop the bill.

Written by