Posted on July 30, 2004

Insurers To Reimburse Overcharged Minorities

AP,, Jul. 30

RALEIGH, N.C. — A settlement has been reached between the state Department of Insurance and three insurers accused of charging black and Hispanic customers more because of their race.

Nearly 1,300 N.C. policyholders or their beneficiaries may be eligible for refunds, the department said Thursday. The settlements were signed with Cincinnati Life Insurance Co., American National Life Insurance Co. and New York Life Insurance Co.

The companies have set aside millions of dollars to pay refunds in North Carolina and other states. Officials in the N.C. Department of Insurance said individual refunds would vary based on the overcharges.

Cincinnati Life, for example, said it would pay victims $75 or the amount they were overcharged, plus interest.

The agreement caps more than four years of investigation into race-based insurance policies, commonly sold between the 1920s and the 1960s. The settlements involve burial policies, typically sold to low-income customers who paid small amounts weekly for policies worth less than $1,000.

“This goes to some of the oldest biases that this country has experienced in terms of racial discrimination,” said department spokeswoman Chrissy Pearson.

Pearson said the department doesn’t know where many of the policyholders or their beneficiaries live. She said it’s unlikely any of the policies are active.

American National, which stopped issuing race-based policies in 1964, said in a statement it operated within the law.

New York Life stopped charging blacks higher prices by 1948.

“Regrettably, in the social and legal environment of that period this was standard industry practice,” said New York Life spokesman William Werfelman. “We are committed to making a good-faith effort to find those former African American policyholders and make them whole by refunding the extra premium with interest.”

Cincinnati Life Insurance “bought the problem” when it acquired Inter-Ocean Insurance Co. in 1973, said Timothy Timmel, senior vice president of operations.

Most policies in question are known as “industrial life” or “burial insurance,” and were geared toward laborers, such as mill workers and coal miners. The fairly small policies became popular, particularly among minorities, in the 1950s and 1960s.

Insurers commonly charged blacks more — sometimes 30 percent more — because the industry believed blacks had shorter life expectancies than whites.

Yvonne Pettis of the Charlotte-Mecklenburg branch of the NAACP, said attitudes changed in the 1960s when insurance companies began hiring black insurance agents, who educated people about better policies.

North Carolina has signed eight settlements with companies involved in race-based underwriting. The state has identified more than 333,000 North Carolinians who overpaid for race-based policies.