NU Online News Service, May 3, 12:17 p.m. – Unitrin Inc., Chicago, has agreed to pay at least $33 million in cash and benefits to settle a suit filed over subsidiaries’ past use of race in underwriting and pricing life insurance policies.
Lawyers filed the suit on behalf of past and current policyholders of the subsidiary companies, and those policyholders’ heirs and beneficiaries, in a state court in Alabama. The settlement is still subject to approval by the state court, Unitrin says.
Unitrin has also negotiated an agreement with state insurance regulators to provide $1 million in additional cash relief for some policyholders and pay a fine of $1.25 million to the state regulators, the company says.
The subsidiaries covered by the settlement and the regulatory agreement are United Insurance Company of America, The Reliable Life Insurance Company and Union National Life Insurance Company.
The subsidiaries charged higher rates for African American customers many decades ago, at a time when actuarial tables showed African Americans had a lower average life expectancy than other Americans, Unitrin says.
“We deeply regret that years ago, some of our companies followed the industry practice of using race as one of several factors in determining insurance rates, and we apologize to our former and current customers for the time it took to address this issue,” Richard Vie, Unitrin’s chairman, says in a statement announcing the settlement. “Race-based pricing is not our practice today and has not been practiced by our companies for decades, so we are pleased to have resolved this historic pricing issue and renew our mission to provide basic, affordable and fairly priced insurance for all our customers.”
Unitrin estimates the court settlement, if approved, will affect about 300,000 policies, or 3% of the policies that the company has in force.
? Current policyholders can choose between cash or higher death benefits on policies that are still in force.
? Beneficiaries or heirs of racially underwritten policies on which a death claim or endowment was paid will receive a supplemental cash payment.
? Persons who owned racially underwritten policies that were in effect after 1960 but have since lapsed or terminated are also eligible to make a claim for benefits.