NU Online News Service, June 4, 3:05 p.m. – Nearly 430,000 minority policyholders in Florida will share in an estimated $50 million settlement with two insurance companies charged with unfair underwriting and pricing practices.
The announcement came today from Florida Treasurer and Insurance Commissioner Tom Gallagher. The unfair practices charges include the use of race-based premiums, the Florida Department of Insurance says.
The amount each affected policyholder will receive will vary depending on the face value of the policy, the type of insurance product purchased and when it was issued, says Tami Torres, Florida DOI spokeswoman.
The premiums paid were for industrial policies–or burial policies–that cover funeral expenses when the insured dies, the DOI says.
The settlement follows a market conduct examination initiated by the state of Georgia in conjunction with the Florida and eight other states on behalf of affected policyholders.
The examination began in November 2000 after it was learned that the companies had historically charged African-Americans higher premiums than white customers for similar or identical coverage, the Florida DOI says.
The examination resulted in a nationwide class-action lawsuit against Life Insurance Company of Georgia, Atlanta, and Southland Life Insurance Company, Plano, Texas.
Both companies, now subsidiaries of the ING Group N.V., Amsterdam, have agreed to provide $50 million in compensation to 2.5 million policyholders across the country and $4 million in fines to insurance commissioners in several southern states, including Florida.
The fine money will be deposited into a regulatory trust fund and used primarily for administration, Torres says.
Under the settlement, affected policyholders or their beneficiaries can choose either to increase their death benefits to the level received by whites for the same premium or receive the difference in cash.
The settlement will not be effective until Aug. 6, when the Tennessee State Court will hold a fairness hearing, Torres says. But the states with the largest number of affected policyholders, including Florida, have already signed onto the settlement, she says.
The settlement will be effective “after the hearing has concluded and all states have signed on,” Torres says.