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Insurers Paying For Policies On Blacks

Some Companies Have Settled Over Claims That African-Americans Paid In More, Got Less

Dec 14, 2002 | The Springfield News-Leader

In her day, Julia Ophelia Jones made a name for herself back in Steubenville, Ohio.

Until she retired in 1980, she was acclaimed as a cook at the Chicken Shack, a popular soul food restaurant. She'd earned respect as a faithful election volunteer who helped voters register.

When Jones died in 1996 at age 82, an Ohio state representative issued a House resolution proclaiming she had "led an exemplary life manifesting the virtues which we all seek to emulate."

Yet in Steubenville today, no monument marks her grave at Union Cemetery.

Although the African-American woman owned three Metropolitan Life "burial" policies policies she'd paid into monthly for almost 50 years benefits at her death didn't cover funeral home and cemetery charges, let alone a headstone.

"She doesn't have a headstone because there wasn't enough money to pay for a headstone," says her only child, Victoria, who lives in Springfield. Though receipts show her mother paid more than $5,000 on the policy, insurance covered only $3,874 in funeral expenses.

This year, six years after her mother's death, Victoria Jones learned that her mother was one of millions of African-Americans who had substandard life insurance policies "” policies with higher premiums but lesser benefits.

Now, like other beneficiaries and policy holders in similar circumstances, Jones is faced with a decision: Should she remain part of a current $150 million class-action settlement with MetLife that could include as many as 1.8 million policies like her mother's issued between 1901 and 1972? Or should she continue fighting against a company she believes treated her mother differently because of the color of her skin?

Dec. 30 is the legal deadline for beneficiaries and policy holders to exclude themselves from the settlement.

Since 1999, such lawsuits and settlements have cropped up, as state insurance departments including Missouri's began investigating charges of race-based pricing and payouts.

While some beneficiaries received much lower benefits than they expected when someone died, others received nothing if they didn't take the initiative to notify companies of their rights to benefits.

MetLife is the fourth major insurer recently to agree to a settlement over the issue: Unitrin, American General and the Dutch ING Group which owns Life Insurance of Georgia have also made multimillion-dollar settlements.

And investigations continue into the practices of other companies, regulators say.

In a statement about race-based pricing, Unitrin said the practice stemmed from decades-old actuarial tables that indicated a shorter life expectancy for African-Americans.

"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 these issues," Unitrin's chairman and chief executive officer, Richard C. Vie, said in the May statement announcing its settlements.

For its part, MetLife continues to claim no wrongdoing in the settlement. "We admit no wrongdoing here," MetLife public relations spokesperson Holly Sheffer said last week.

Still, it agreed in the settlement to provide an increased policy death benefit, cash payment or special settlement death benefit for African Americans who held such policies from 1901 through 1972.

"The settlement addresses policies that were issued decades ago amid circumstances that are no longer prevailing today," Met Life chairman and CEO Robert Benmosche said in a statement announcing the settlement. "We determined it would be appropriate with respect to certain policies to make adjustments and payments as provided in the settlement."

Insurance companies are paying millions to settle such cases.

For Missouri, MetLife's settlement is $4.8 million for more than 55,000 residents, while the state's settlement with Unitrin the holding company for Reliable Life Insurance Co., Union National Life Insurance Co., and United Insurance Co. of America resulted in $3 million to 34,753 Missourians.

How much Missourians have received since 2001 from American General Insurance Co. is still undetermined, said Randy McConnell, communications director for the Missouri Department of Insurance. Nationwide, that settlement was close to $250 million, he said.

Despite publicized settlements, many aren't aware such disparities existed.

"Even right now, as we're talking, I don't think most African-Americans realize that this practice occurred," said Fortis Morse, whose Consumer Justice Center is pursuing a separate case against MetLife. "We're going back 30 years at a minimum, and people's memories fade after 30 years."

Reminders in the mail

But memories are sharpening as local residents open mail to find official-looking letters addressed to "potential class members."

The letters remind them that they're beneficiaries of small-value policies "” policies in some cases with face amounts less than $1,000 "” that began when their parents paid weekly or monthly premiums to door-to-door agents.

Recipients recall seeing family members hand over nickels, dimes and dollars for years, only to get little or nothing in death benefits.

Some street agents said they knew of the race-based rate tables used to calculate premiums. Others didn't.

"I know of street agents who are embarrassed that this happened and had no idea of their role," said the Consumer Justice Center's Morse.

That was true for at least two African-American men hired to call on Springfield's black community in the '60s and early '70s.

Zack Tolliver saw many familiar faces as a door-to-door agent for a company here in the 1960s. After 18 months on the job, however, he quit.

"I didn't feel comfortable with some of the practices," said the native Springfieldian.

One of those practices was to single out African-Americans from a list of policyholders in one older neighborhood.

"They turned around and pulled all the blacks out of it," Tolliver said. "It was discrimination from the get-go."

From 1970 through 1973, Clark Pike worked the same route.

"I think I went to almost every black person's house in Springfield and collected," he said.

If the company charged African-Americans higher rates, Pike like Tolliver said he didn't know that, as he collected payments as low as $1.50 a month. Nevertheless, some didn't have the money.

Pike had been told they would lose coverage if they let policies lapse, so there were times he dug into his own pockets for the premiums.

When older policyholders died, it was also Pike's job to deliver checks for death benefits. Those amounted to little, he recalled.

"The highest one was, I think, a $500 check."

Still, many African-Americans trusted that their policies, faithfully paid, would cover the cost of a funeral and burial when they died, so relatives wouldn't be burdened with the expense.

"The reason people bought these life insurance contracts is because they expected it largely to go toward the cost of their burials," McConnell said.

One of Tolliver's aunts, Myrtle McCullah, had that expectation.

When the retired Greene County Courthouse custodian died in the late 1970s, she had policies with four companies MetLife and Reliable Life among them, but relatives still had to help pay for her funeral and burial.

"That damn stuff wouldn't pay for a good bouquet of flowers," Tolliver said of the weekly policies his aunt maintained.

Said McConnell, with the Department of Insurance: "There was absolutely no return on their investment. They lost money on the policy."

Another factor that played into the sales: illiteracy, which kept some from understanding what they were buying.

"A lot of our older people didn't know how to read them," Tolliver said of the policies he sold.

With an eighth-grade education, Julia Jones knew how to read, her daughter said, yet she, too, bought MetLife policies in the good faith they'd pay off someday.

"She never told me how much her policies were," Jones said. "She just said if anything happened to her, I never had to worry, and there would probably be a little left for me."

Unfinished stories

Long after anti-discrimination laws made race-based pricing in contracts illegal in the 1960s, many minority policyholders continued to pay higher premiums on existing policies.

That's what Missouri Department of Insurance investigators discovered in 1999 and 2000, along with state insurance investigators from Florida, Illinois, Louisiana, New York and Texas.

"Almost literally, people stumbled across the fact that there were two different rates being charged still," McConnell said.

"The companies continued charging premiums to blacks that were more than whites' on existing policies," he explained. "They didn't go back and recalculate the premiums. Even though they corrected the racial discrimination of premiums for new policies, on many of the old policies, people continued to pay more than they should have."

For example, the Unitrin settlement covers policies issued from 1960 through 1989, McConnell says. As late as this year, some policyholders paid higher premiums, he said.

Unitrin has since apologized, and said an estimated 300,000 policies will receive relief from the settlement.

Checks in the mail

About two weeks ago, Clark Pike found an envelope with a return address of "United Class Action Administration Center" in his mail.

The words "Important Legal Notice" were underlined on the front.

Inside was a reminder that, years ago, two holders of a small-value life insurance policy from Reliable Life were his late parents, Dempsey and Glyndolyn Pike.

And there was a settlement check for $10 addressed to Pike, one of six siblings.

"When I got that letter, I said, "˜What?'"

Pike, now 57 and a professional chef, laughed when asked what he bought with the money.

With the Dec. 30 deadline for exclusion from the MetLife settlement on the horizon, however, other beneficiaries of discriminatory policies are seriously trying to decide what path to follow.

As part of their settlement agreements, MetLife and Unitrin must contribute millions to non-profit causes that benefit African-Americans.

MetLife will donate up to $5 million to the United Negro College Fund, and Unitrin will contribute $108,044 of $1.2 million in fines to Missouri's school textbook fund.

Yet what individuals gain from settlements is still a question for many.

"People need to know that the proposed class settlement is not entirely cash," Morse said. "Once they realize that there are insurance policies as part of the class, they can think about whether they would really want those policies."

Indeed, when asked what the average payout in the MetLife settlement might be, JoBeth Halper, the lead counsel for the plaintiff in Thompson vs. Metropolitan Life, said, "The answer isn't that simplistic because it depends on what the individual situation is."

Many beneficiaries will have the choice to take cash or additional death benefits as settlements, said Halper. Still others those with terminated policies will get only death benefits.

Of 1.8 million affected MetLife policy holders nationwide, only 200,000 are likely to receive more than $100, McConnell said. The Department of Insurance doesn't advise policyholders to accept policy reinstatement as a settlement.

But McConnell can't recommend that people exclude themselves from the MetLife settlement to join another suit against the company.

"These attorneys are welcome to go around and recruit all the clients they want to," McConnell said. "But keep in mind, if you opt out of the case and they lose the case, you've lost out on everything."

The next chapter

Looking over mementos of her mother's life, Victoria Jones said she has nothing to lose by excluding herself from the MetLife settlement and joining the suit led by the Consumer Justice Group.

On a fixed income as a military clerk-typist living on disability benefits, she took five years to pay off $1,200 in funeral and burial fees that weren't covered by her mother's MetLife policies. Expenses including $995 to open and close the grave site totaled $5,074.

She talked quietly about moving back to Steubenville to be closer to friends, and to her beloved mother's memory.

"I want to be able to go and visit my mother's grave, to clean it and plant flowers or something," Jones said.

As she thought about the policies, her voice rose in indignation.

"My mother paid all her life into that, and that's all she got," she said. "The money is not the issue. The point is, my mother was treated unfairly."

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