Settlement Expected in Insurance Bias Case

By JOSEPH B. TREASTER
The New York Times
June 21, 2000


Insurance regulators around the country and class-action lawyers are expected to announce a settlement today in a case involving accusations of racial discrimination against a unit of the American General Corporation, one of the nation's biggest life insurance companies.

Regulators say that the unit charged higher premiums for blacks than for whites and that it sometimes collected more in premiums than the face value of a life insurance policy. Executives did not respond to a request for comment last night.

The policies, generally for as little as a few hundred dollars, are primarily intended to cover burial costs. Settlement negotiations on behalf of all 50 states have been directed by Bill Nelson, the state insurance commissioner in Florida, who began an investigation last fall after receiving complaints from customers.

Lawyers from the New York firm of Milberg, Weiss, Bershad, Hynes & Lerach, which is a leader in class actions, filed suit on behalf of several customers.

A full list of the states in which the discrimination is said to have occurred has not been compiled, but indications are that it was concentrated in the Southeast, including Alabama, Florida, Georgia and Tennessee.

Mr. Nelson subpoenaed five insurance companies, including American General Life and Accident Insurance, the American General unit.

Earlier this year, Mr. Nelson's office began negotiations with American General. After the talks broke off, he issued a cease-and-desist order against American General Life, demanding that it stop collecting what the Florida regulators described as excessive premiums charged to black customers. A few days after the order was issued, the negotiations resumed.

Regulators in New York began an investigation into similar sales practices this month.

States' penalties for such racial discrimination range from fines to suspension or even revocation of sales licenses and would probably include payment of restitution to policyholders.

Copyright © 2000 The New York Times Company



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