Florida policyholders to pocket $9 million of race-based insurance settlement
In a settlement of a class action lawsuit claiming unfair pricing practices, including using race to set premium prices, two insurance companies will pay 430,000 Florida policyholders about $9 million in compensation.
|Race-based insurance pricing has resulted in a $50 million compensation award for policyholders in 10 states.|
According to Florida Treasurer and Insurance Commissioner Tom Gallagher, Life Insurance Co. of Georgia and Southland Life Insurance Co. both engaged in race-based pricing when they charged black clients higher premiums than whites for the same coverage. The policies include Industrial Life and President's Thrift Series from the Life Insurance Co. of Georgia, substandard policies from insurance companies owned by Southland, and policies from Life Insurance Co. of Georgia in which the premiums paid exceeded the death benefit. The total compensation award is $51 million for policyholders and beneficiaries nationwide.
"This kind of discrimination is inexcusable and should not have occurred," says Gallagher. "The relief is a long time in coming."
The lawsuit came on the heels of a market conduct exam initiated by Georgia in 2000 and joined by Florida and eight other states. In addition to the $50 million in compensation to policyholders, the two insurance companies will also pay $4 million in fines to state insurance commissioners. Florida's portion of the fine, expected to be $688,000, will be deposited into Florida's Regulatory Trust Fund.
Policyholders have a choice in how they are compensated, according to Florida Department of Insurance spokesperson Tami Torres. "People can choose to increase their death benefits to the level received by whites for the same premiums, or they can take the difference in cash," Torres says. "The insurance companies are expected to start sending out packets next week to begin notifying people if they qualify, and policyholders really need to review the information they get." Torres says people who opt for the cash value will have to fill out an election card and submit it to the insurance company. Policyholders can also opt out of the settlement.
For those who choose to participate, the amount paid will depend on the face value of the policy, the type of insurance plan purchased, and when the policy was issued, says Torres. "There really isn't an average payout amount per person, but we expect Florida policyholders to receive between $8 million and $9 million in compensation," she says.
The industrial policies were typically sold door-to-door in the 1960s in low-income neighborhoods. Policyholders paid weekly premiums and blacks were commonly charged more than whites.