MetLife Inc., the parent of Metropolitan Life Insurance Co., will pay up to $4.8 million to thousands of Missourians a majority of them African-Americans to whom it charged higher burial-insurance premiums than whites.
The payment, announced on Friday by Gov. Bob Holden, is part of an estimated $160 million national settlement MetLife proposed in August to resolve a class-action suit accusing it of discriminatory business practices.
The policyholders or their beneficiaries will get payments ranging from $20 to $82, depending on the original value of the policy.
The Missouri Department of Insurance and the insurance agencies of the other states joined the New York State Insurance Department, which filed the suit.
In Illinois, MetLife sold 150,000 to 170,000 policies covered by the settlement, said Robert Enoex, chief counsel of the state’s Department of Insurance. He estimated that the Illinois share of the settlement would be about $13 million.
MetLife took a $250 million pre-tax charge related to the suit in the fourth quarter of 2001, according to reports filed with the Securities and Exchange Commission.
MetLife’s abuses involved selling and charging high premiums on small insurance policies – worth $1,000 to $5,000 – sold door-to-door to African-Americans and other non-whites.
The suit dealt with:
Industrial life policies sold from 1901 to 1964. These types of policies usually paid a death benefit of less than $1,000.
Ordinary life policies sold from 1901 to 1972.
The “Metropolitan Series” of policies sold from 1960 to 1972.
Holden said, “The worst vestiges of racism in this country and in the insurance industry have eased or ended, but our Department of Insurance is vigorously pursuing restitution for these kinds of abuses that took advantages of low-income, minority Missourians.”
MetLife will compensate about 55,100 Missourians, including as many as 30,000 policyholders or their beneficiaries in the St. Louis metro area, according to Eric Martin, general counsel of the Missouri Department of Insurance.
While the individual settlement amounts are small, the Rev. Earl Nance Jr., president of the St. Louis Metropolitan Clergy Coalition – a church group that has accused many financial institutions of discrimination – said they would teach MetLife a lesson.
The settlement “confirms what we’ve always suspected all along,” Nance said. “It sends the message to insurers.”
The MetLife payment is the third and largest settlement made in the last two years by a major insurer accused of race-based underwriting practices.
In May, Reliable Life Insurance Co. of Webster Groves agreed to pay $35 million to settle charges that it charged blacks higher rates for life insurance.
In June 2000, the American General Life & Accident Co. of Nashville, Tenn., agreed to pay policyholders and beneficiaries nationwide $215 million to settle a case involving similar allegations.