Class-Action Bias Suits Name Two Insurers

The New York Times
July 14, 2000

The two largest American life insurance companies, MetLife and Prudential Insurance of America, have been accused in two class-action lawsuits of charging their black customers higher premiums for life insurance coverage than they charged white customers.

The lawsuits, the latest of several on similar grounds, were filed in Federal District Courts in New York and Newark, where the companies have their headquarters. The companies said they stopped using race as a factor in life insurance sales about 50 years ago.

Both companies said that some of these policies remained in effect, but that they had stopped collecting premiums on them in the early 1980's.

"This is in no way reflective of MetLife's business today," said Kevin Foley, a spokesman for MetLife, which is based in New York.

Prudential said through a spokesman, Robert DeFillippo, that while race had once been a factor in the company's sales, it was now "completely unacceptable."

Less than three weeks ago, American General, the fourth-largest life insurer, agreed to pay restitution of $206 million to settle a class-action lawsuit and claims from insurance regulators that for decades the company charged black customers higher premiums than whites and that it often collected premiums from customers of all races that exceeded the value of their insurance policies.

Florida is investigating four other companies for similar practices.

The focus of the lawsuits and investigation has been on policies intended to cover burial expenses. Death benefits were often a few hundred or a few thousand dollars.

Insurance regulators say more than 30 companies sold these policies, and they suspect that many discriminated against blacks. For years, insurance actuarial tables were based on the assumption that blacks had shorter life spans than whites. Now, actuaries and sociologists say that poverty rather than race led to shorter lives.

The two suits were first reported in The Wall Street Journal.

Prudential said that over several decades it had been increasing the death benefits on policies for black customers who had paid higher premiums, or had been refunding the higher premiums. MetLife insisted that it never had separate rates for blacks and whites, but that being black was regarded as an additional risk factor.

"If you were rated a high risk, white or black, you paid the same price and got the same benefits," Mr. Foley, the MetLife spokesman, said. He said he did not know whether the high-risk category was made up of more blacks than whites.

John Stoia, a partner in the law firm of Milberg Weiss Bershad Hynes & Lerach, who has been working on both lawsuits with lawyers at several other firms, said he hoped to get refunds or increased death benefits for customers who paid higher rates for coverage.

Mr. Foley of MetLife said his company would "defend itself against the idea that MetLife was deceitful, that it defrauded African-American policyholders or hid from them any facts necessary for them to make their purchases." He added, "There was no economic loss on the part of any African-American policyholder who bought a policy from us."

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