NU Online News Service, Nov. 7, 2002, 2:24 p.m. – Missouri Gov. Bob Holden today said MetLife Inc., New York, has agreed to pay up to $4.8 million to 55,172 Missourians to compensate for charging higher life insurance premiums solely because the policyholders were racial minorities.
The settlement is the latest in a series of race-based premium investigations conducted by the Missouri Department of Insurance, St. Louis.
The department says it began its inquiries began after it received evidence that African-Americans and other minorities were paying higher premiums than whites for the same coverage, long after court cases concluded that such contracts were illegal.
The alleged abuses usually involved small face value life contracts known as industrial life or “burial” insurance that were sold door-to-door and paid in weekly or monthly premiums by low-income residents, the insurance department says.
The Missouri Department of Insurance says it joined the New York Department of Insurance in the MetLife case, which affected minority policyholders in all 50 states and the District of Columbia and could provide compensation up to $160 million nationally.
The U.S. District Court for southern New York has given preliminary approval to the settlement, but it still must sign off on the final documents, said Scott B. Lakin, the Missouri Department of Insurance director.
The settlement reaches back to policies issued in 1901 and provides full compensation for those who paid more because of race-based pricing and underwriting on an estimated 1.8 million policies. Nationally about 200,000 policyholders will receive compensation greater than $100.
Involved are industrial life policies issued from 1901 to 1964 of less than $1,000 face values; ordinary life policies from 1901 to 1972 for nonstandard risks; and so-called “Metropolitan Series” policies issued from 1960 to 1972 with face values of $4,500 to $5,000, the Missouri insurance department says.
The settlement fund will donate $5 million to the United Negro College Fund. The insurer will spend $6 million on a television, radio and print outreach program to notify potential beneficiaries.
MetLife is sending settlement notices to all non-Caucasians in its files with in-force policies; beneficiaries of those who died in the past seven years; and others whose policies terminated since January 1989, the insurance department says.
The settlement is subject to a fairness hearing to be held in Federal district court in New York City on February 7, 2003.