Race-biased premiums: African Americans receive reparations for years of disparaging insurance practices. (Buying Power).

The practice of charging African Americans as much as 35% more for life insurance than white policyholders is not a new one. Beginning in the 1930s, many of our parents and grandparents unknowingly purchased policies that were often coded "substandard" and based on mortality tables that showed them to have shorter life expectancies. They were charged higher rates.

These industrial life policies, also known as "burial policies," were primarily sold door-to-door, to low-income African Americans who purchased them to cover funeral expenses. In many cases, the premiums exceeded the face value of their policies. After several law firms, thousands of plaintiffs, and a little more than 70 years later, an investigation initiated by the National Association of Insurance Commissioners found that many of these insurance companies had altered, but not changed their race-based policies. Currently MetLife, Prudential, Liberty Life, and more than 20 other life insurance companies are under investigation.

American General Corp. of Houston will have to pay $206 million to African American policyholders in June 2000, and an additional $7.5 million in fines to be split among various states--one of the largest of such lawsuits. In this case, one policyholder, a 70-year-old Florida woman, had paid $4,700 for several burial policies between 1964 and 1985 that were worth only $3,000 upon her death.

"This is tremendously distressing to me. I have a real passion for holding these insurance companies accountable and I'm certain there are others that haven't been caught as yet," says attorney Johnnie Cochran.

Cochran's firm will be representing individuals who chose to opt out of the recent Life Insurance Co. of Georgia class action, for an expected $55 million to $60 million settlement. Three million policies nationwide could be eligible for reimbursement under this settlement. While many companies discontinued charging different premiums based on race for new policies, Life Insurance Co. of Georgia, licensed to sell insurance in 30 states, continued to collect the higher premiums on already existing policies until last year. The settlement calls for black policyholders who paid the higher rates before 1966 to receive the difference between their premiums and those of white customers plus 5% interest.

Customers in later years would receive at least 70% of the premium difference. When a federal judge gives final approval, the company will also have to pay at least $4 million in fines.

The Cochran Firm, with law offices in California, New York, Alabama, Illinois, Georgia, Tennessee, and Washington, D.C., is encouraging individuals involved in the class action lawsuits against Life Insurance Co. of Georgia and other insurance companies to seek independent representation for their claims. "This is institutional racism and discrimination. It's a perpetuation of the ideas and attitudes of slavery, and somebody needs to be punished for that. I'm not sure the settlement amount for the number of policyholders is sufficient," says Cochran.

Those plaintiffs in the Life Insurance Co. of Georgia settlement who chose not to accept funds from the settlement before the July 7 opt-out date may receive both punitive and compensatory damages if they sue individually. "The recovery for the individuals in many and most situations after having opted out will be more equitable and fair than the recovery received by the class [action] participants," says Keith Givens, a lawyer at The Cochran Firm.

What can a person do to make certain this does not happen to them? "It is always helpful to check with the Department of Insurance when approached by an agent or a company to purchase a life insurance policy, particularly if you are unfamiliar with the company or the agent," says Georgia Commissioner John Oxendine. "The Department can tell you if either the company or the agent is properly licensed to do business in the state, and whether any complaints have been received from other consumers." He also suggests reviewing the policy contract carefully and having unclear terms explained to you by the agent or by someone you trust.

It is difficult to determine bias on the basis of the policy contract alone. Sometimes it can only be discovered by comparing the companies pricing practices and carefully reviewing rating manuals, policy files, and claim files. If you have any questions, it's always best to call your local state insurance commissioner.