NU Online News Service, Aug. 30, 10:43 a.m. – MetLife Inc., New York, says it has negotiated agreements that could help its Metropolitan Life Insurance Company unit put complaints about old, race-based life insurance underwriting practices behind it.
Metropolitan Life has reached a preliminary agreement to settle a federal class-action lawsuit filed on behalf of affected consumers.
Metropolitan Life has also agreed to a settlement with the New York State Insurance Department that should resolve a New York department investigation of the race-based underwriting practices.
The affected customers, and the beneficiaries of customers who are already dead, could collect about $160 million in compensation, according to the New York department.
Compensation could take the form of an increased policy death benefit, a cash payment or a special settlement death benefit, MetLife says.
MetLife Chairman Robert Benmosche put out a statement emphasizing that the race-based underwriting practices at the center of the complaints were relics of the past.
“The settlement addresses policies that were issued decades ago amid circumstances that are no longer prevailing today,” Benmosche says.
MetLife began the process of equalizing policy benefits in 1948, Benmosche adds.
New York State Insurance Superintendent Gregory Serio has welcomed the MetLife settlement agreement, but he released a statement of his own arguing that the “insidious practice of race-based underwriting can never truly be remedied.”
The New York department is “actively involved in and continues to pursue other investigations involving additional New York licensees,” Serio says.
The New York department defines race-based underwriting as using “different premium rates, compensation rates, risk classifications and unequal treatment with regard to dividends, benefits or other policy terms or conditions, based solely on race.”
The Metropolitan Life settlement includes all African-American, Hispanic and other “non-Caucasian” purchasers of industrial life policies issued by Metropolitan Life from 1901 through 1964 with face amounts less than $1,000.
The settlement also includes non-Caucasian customers who bought ordinary policies from 1901 to 1972 with substandard risk classifications, and those who bought Metropolitan Series policies with face amounts between $4,500 and $5,000 between 1960 and 1972.
“MetLife is required to provide settlement benefits automatically to all those whose policies currently are in force, those whose policies have terminated by death within the past seven years, and those whose policies have otherwise terminated since January 1989,” the New York department says.
When purchasers have already died, Metropolitan Life will pay the settlement compensation to relatives of the purchasers, MetLife says.
MetLife has agreed to spend about $6 million on efforts to notify affected parties about the settlement, New York department officials report.
The U.S. District Court in New York has given the proposed class-action settlement preliminary approval and scheduled a fairness hearing for Feb. 7, 2003. The court still must give the settlement final approval before Metropolitan Life can implement it.