Reliable Life allegedly charged race-based premiums
Reliable Life Insurance Co. has been sued in a potential class action lawsuit that claims the insurer is charging blacks more than whites for burial policies.
The lawsuit, filed Oct. 10, accuses Reliable of targeting "low income, impoverished, unsophisticated, and minority segments of the population" as potential buyers of burial insurance policies. Burial insurance policies — or "industrial" insurance policies, as they are often called — pay for a policyholder's funeral expenses when he or she dies. Burial policies generally have small face values, usually under $5,000.
The suit claims that Reliable intentionally charged blacks more than whites.
The suit claims that Reliable intentionally charged blacks more than whites for these policies using a "discriminatory pricing system." The lawsuit, filed in U.S. District Court in Eastern Missouri, seeks class action status. Class members include any black person who has purchased a burial policy from Reliable or Supreme Life Insurance Co. Reliable purchased Supreme Life in 1991.
Diane Nygaard, an attorney for the plaintiffs, says that although the two plaintiffs named in the lawsuit bought policies from Supreme Life, she alleges that Reliable also sold policies with race-based premiums.
According to the complaint, many policyholders paid weekly or monthly policy premiums, and premiums were collected door-to-door by Reliable agents. The lawsuit claims that Reliable concealed the fact that over the life of the policy, these small premiums would "far exceed" the face value of the policies.
The insurer is also accused of prohibiting its agents from selling standard life insurance policies to blacks. "Reliable has trained, allowed, or encouraged its agents to routinely sell industrial policies to policyholders when the policyholders' best interest would have been served by traditional ordinary whole life products of similar face value," the lawsuit says.
In July, American General agreed to a $206 million settlement for a similar lawsuit that alleged the insurer acquired companies that charged blacks more than whites for burial insurance policies. In addition, the insurer must pay $7.5 million in fines that will be divided up among all 50 states.
Joyce says that Reliable does not use race as a rating criteria and has not used it for three decades.
Steve Joyce, vice president of compliance for Reliable Life, says that Supreme Life operated with a single set of rates for all customers, most of whom were black. "This was the company's practice even in the 1950s and 1960s when using race as [a rating] criteria was standard insurance industry practice," he says. "Reliable is dedicated to serving our customers, especially those in minority communities, as we have for many decades."
While Joyce says that using race as a means to determine rates was a common industry practice many years ago, he says that Reliable does not use race as a rating criteria and has not used it for three decades.
Paying more than what they're getting
Radford Moore, 65, one of the plaintiffs in the lawsuit, bought two individual life insurance policies from Supreme Life. Each policy had a $3,000 face amount, which would reduce to $1,000 when the policyholder turns 65. Moore paid $19.72 each month for 17 years — which totals $1,982.88 — on a policy that will pay $1,000 on his death.
Phoebe Watkins, another plaintiff, bought a $250 industrial whole life policy from Supreme Life in August 1943. She paid 14 cents per week on the premium. As of September 2000, she had paid $414.96 in premiums for more than 57 years, and the policy had a cash value of $183.07. In January 1955, Supreme Life sold Watkins another $250 industrial whole life policy for $26 per week in premium. Watkins has paid $610.48 in premiums on a policy that is "payable weekly for life."