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Prudential and MetLife sued over race-based life insurance premiums

Prudential Insurance Co. of America and Metropolitan Life Insurance Co. are facing potential class action lawsuits that allege they charged blacks higher life insurance premiums than whites and sold them policies with inferior benefits.

Prudential allegedly prevented its agents from selling "more favorable, less expensive life insurance policies" to blacks.

The two insurers are the latest to be accused of charging race-based premiums for burial policies — which are sometimes called industrial, intermediate, monthly debit ordinary, home service, or debit policies. Burial policies cover funeral expenses when an insured dies. These policies generally have small face values (less than $1,000). Similar lawsuits are pending against Atlanta Life Insurance Co., Liberty National Life Insurance Co., Life Insurance Co. of Georgia, Monumental life Insurance Co., Mutual Savings Life Insurance Co., and United Insurance Co. of America.

In June, American General Life Insurance & Annuity Co. reached a $206 million settlement over similar allegations that companies it had acquired charged blacks higher premiums — and overcharged people of all races for burial policies. (For more, read Insurance commissioners approve $206 million settlement in American General lawsuit.)

The Prudential and MetLife suits, which were filed on June 27 and July 11, respectively, seek national class action status. If they are certified as class actions, class members would include all beneficiaries and any black person who bought a MetLife or Prudential burial policy and paid a higher premium based on his or her race.

In a statement, Prudential acknowledges that it used race-based underwriting in the past, but says it ceased the practice many years ago. "In 1950, race-based underwriting stopped for good. Today, Prudential does not collect one extra penny in race-based premium," the company says.

Prudential also says it has tried to credit the overpaid premiums on policies that had been issued with race-based premiums, but admits it took corrective action only when policyholders asked about their race-based premium, changed their policy, filed a claim, or surrendered their policy. Policyholders who bought burial policies before 1951 and want to have policies reviewed may call Prudential's customer service line at (800) 201-7189.

Kevin Foley, a spokesperson for MetLife, says the allegations "have serious inaccuracies and are very misleading." As evidence that MetLife has treated all policyholders fairly throughout its history, Foley noted that any person who had a burial policy in force received 10 shares of MetLife stock when the insurer went public in April. "We do not believe that any one class of policyholders suffered economic hardship as a result of doing business with us," he says.

"Low value, high-priced policies"

The two suits, which contain similar allegations, charge that both MetLife and Prudential marketed "low value, high-priced policies" to black policyholders. According to the suit, Prudential agents "manipulated" black buyers by making them feel guilty that their survivors would be left to pay for their burial if they did not buy a policy.

Blacks frequently paid more in premiums than what their policies were worth.

Prudential allegedly charged blacks higher premiums than whites by using "socio-economic underwriting," which determined policyholders' premiums according to occupation, social traits, and living conditions. For example, Robert Henderson of St. Petersburg, Fla., the plaintiff in the Prudential suit, bought a $3,000 "monthy debit ordinary family policy" from Prudential and paid $9 a month in premiums. The suit alleges that blacks paid more than whites, but the complaint does not say what whites would have paid for such a policy.

Similarly, Karl Thompson of Germantown, Md., the plaintiff in the MetLife suit, says that the insurer sold his mother a burial policy in 1943 with a face value of $143. The suit alleges that Thompson's mother was charged more than whites would have been charged for a similar policy, but, as in the Prudential suit, the complaint does not say what whites would have paid for such a policy.

In addition, Prudential and MetLife allegedly prevented their agents from selling "more favorable, less expensive life insurance policies" to blacks. Blacks frequently paid more in premiums than what their policies were worth, and received no benefits — such as no large death benefit or accumulated cash value.

The suits also allege that in some cases, the insurers denied burial policy claims from blacks, knowing that policyholders would not be able to prove that they had paid the required premiums or have the means to sue the company if they were denied.

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