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Philadelphia-United to make amends for race-based life insurance premiums

The Pennsylvania Insurance Department (PID) has announced an agreement with Philadelphia-United Life Insurance Co. to compensate African-American policyholders who were charged higher life insurance premiums based on their race.

"For anyone who can be found, be it a policyholder or a beneficiary, restitution will be made."

The settlement, valued at more than $1 million, will compensate approximately 23,000 African-Americans who bought life or burial insurance policies from Philadelphia-United between 1933 and 1948 and continued to pay premiums on those policies after 1974.

According to Melissa Fox, deputy press secretary for the PID, in 1948 Philadelphia-United stopped selling policies that charged discriminatory premiums based on the race of the applicant, but the insurer allowed existing policies to stay in effect.

In 1974 Pennsylvania banned the practice of charging premiums based on the race of an insurance policyholder, but about 23,000 discriminatory policies issued by Philadelphia United remained in effect — and almost 12,000 remain in effect to this day.

The owners of the 12,000 policies that are still active will have the policy's death benefit increased to the level that could have been purchased for the same premiums by a white consumer, says Fox.

Policyholders who surrendered their policies for cash value after 1974 will receive additional compensation, as will the beneficiaries of policyholders who died after Pennsylvania passed the Unfair Insurance Practices Act of 1974.

Policies that lapsed due to nonpayment of premiums are not included in the settlement, says Fox.

"For anyone who can be found, be it a policyholder or a beneficiary, restitution will be made," says Fox.

According to the terms of the agreement, Philadelphia-United will set up a toll-free number to answer policyholder or claimant questions, send out direct mailings, and make announcements in local newspapers in an effort to locate eligible policyholders or beneficiaries.

Philadelphia-United alerted state regulators that it had continued to charge premiums based on the race of the policyholder after the Unfair Insurance Practices Act of 1974 upon learning of an industry-wide market conduct survey.

"Philadelphia-United offered to make amends when it became aware of the race-based pricing problem," says M. Diane Koken, the insurance commissioner in Pennsylvania. "I'm pleased that the company wasted no time in correcting the problem."

In June 2000, Philadelphia-United was ordered to stop collecting premiums on policies that used race as a pricing factor in Florida.

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