Life of Georgia Nears a Settlement In Suit Over Race-Bias in Premiums

The Wall Street Journal
January 9, 2002

Life Insurance Co. of Georgia tentatively has agreed to reimburse African-American customers more than $45 million to settle allegations that it routinely charged blacks higher rates than whites for identical policies, people involved in the negotiations said.

The settlement, expected to be announced by the end of this month, would resolve a lawsuit in federal court in Louisiana against the company by black policyholders, as well as an investigation by a multistate group of insurance regulators.

The amount would make the settlement the second-largest to date in the series of lawsuits and investigations stemming from inquiries into race-based pricing by life insurers. In 2000, American General Corp. agreed to pay $215 million to settle allegations it had charged higher premiums to African-Americans on smaller policies.

Life of Georgia, which is based in Atlanta and was founded in 1891, was acquired in 1979 by the Netherlands-based company that is now ING Groep NV. Dianne Bernez, a spokeswoman for ING's U.S. operations, confirmed that "we are very close to wrapping up negotiations, and we're very confident we're going to reach a settlement shortly."

Ms. Bernez declined to discuss details. But others with knowledge of the talks said the agreement would involve reimbursing African-American customers an amount in the range of $45 million to $60 million and also would include a much smaller amount in fines paid to the states. They said a number of lesser details in the settlement were still being worked out.

Georgia Insurance Commissioner John Oxendine, who is participating in the negotiations, said about three million Life of Georgia policyholders could be eligible for compensation under the settlement.

Life of Georgia was one of the companies cited in a Wall Street Journal Page One article in April 2000 that reported that several large life insurers in the past had routinely sold policies with higher rates for blacks than for whites for the same amounts of coverage, and that they were continuing to collect higher premiums from black customers on policies still in force.

That article quoted a former senior Life of Georgia actuary, who said that discrimination remained when he left the company in 1981 and that on certain kinds of policies the company had two rate tables, one for blacks and one for whites. The article reported that Life of Georgia denied it had ever used race-based rates.

Asked if the company still denies the allegations, Ms. Bernez said Tuesday that ING wouldn't discuss Life of Georgia's past actions until the settlement is announced.

The Life of Georgia developments come as state insurance departments around the country have recently announced progress in several other of the pending investigations of more than 100 life insurers suspected of having used race-based pricing. In December, the South Carolina insurance department said it had moved to impose fines and suspend the operating license of Liberty Life Insurance Co., which the state said had continued to collect premiums from blacks that were about a third higher than those charged for whites with similar policies. The Greenville, S.C., company said it is appealing the move.

A smaller South Carolina company, Charleston-based Atlantic Coast Life Insurance Co., last month agreed to pay $1.1 million to settle a state investigation and a private lawsuit alleging it had charged discriminatory rates.

In November, New York's state insurance department released the first of what it says will be a series of investigation reports. The report, on Phoenix Life Insurance Co., said the unit of Phoenix Cos., Hartford, Conn., had violated antidiscrimination regulations decades ago, but it recommended no penalty because investigators said they couldn't find evidence that recent policyholders were affected.

The state says a major investigation of MetLife Inc., the nation's second-largest life insurer, is continuing. MetLife also has been sued in federal court in Manhattan by black policyholders. New York-based MetLife, which is contesting the lawsuit, has said that it is cooperating with the New York investigation.

Copyright © 2002 Dow Jones & Company

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