NU Online News Service, Dec. 20, 7:48 p.m. – Prudential Financial Inc., Newark, N.J., says it has agreed to settle a legal dispute over at least 201 in-force life insurance policies shaped by race-based underwriting rules that were in effect decades ago.
Prudential will make amends for the race-based underwriting practices by “equalizing” the value of the affected policies and contributing $500,000 each to the United Negro College Fund and the NAACP Legal Defense Fund, the company says.
“Race-based underwriting should never have occurred in the life insurance industry,” Prudential says in a statement about the 201 policies.
The charitable donations and equalizations are part of a settlement negotiated with Milberg Weiss Bershad Hynes & Lerach L.L.P., New York, and other law firms that have filed suits against life insurers based on complaints about the lingering effects of race-based underwriting practices.
The New Jersey Department of Banking and Insurance and other regulators have reviewed the settlement proposal, Prudential says.
Lawmakers in some states began attacking race-based life underwriting practices in the 1800s, but life insurers argued at the time that they had to charge higher rates for African-American policyholders because African-Americans had much higher mortality rates than other policyholders.
Prudential says it ended the practice of using race-based underwriting in 1950 and “substantially eliminated the inequities in its life policies” in later years.
Prudential will compensate holders of the 201 policies it has discovered that were not corrected by giving them cash payments or more coverage, Prudential says.
Prudential also plans to run advertisements in African-American and minority publications to locate other individuals who might have been affected but were not identified through its own research.
Prudential says it is making the charitable contributions to the United Negro College Fund and the NAACP Legal Defense Fund to make up for cases of race-based underwriting for which records are no longer available.