American General Life And Accident Insurance Co. Pays $206 Mil. Settling Claims It Overcharged Blacks

Jet, July 10, 2000

One of the nation's biggest life insurance companies agreed to pay $206 million to settle allegations it overcharged millions of mostly poor, Black customers for burial insurance because of their race.

American General Life and Accident Insurance Co., based in Nashville, settled after a federal class action lawsuit was filed and Tennessee insurance commissioners threatened sanctions. Under the settlement, American General also will pay $2 million to the NAACP and $7.5 million in penalties to several states.

In Florida, which has the most policyholders, Insurance Commissioner Bill Nelson said several insurance companies now owned by American General began discriminatory sales practices decades ago, mostly to poor, uneducated Blacks in the rural South.

Burial insurance helps pay for the policyholder's funeral and burial. The American General policies often were for a thousand dollars or less.

The customers included 71-year-old Bessie Jones, who gave a door-to-door salesman a few cents a week for much of her life. She did not make much money as a domestic worker in Quincy, FL, and wanted to leave something for her two children and her grandchildren. Jones paid more for her policy than White people with similar risks.

Nelson said the companies owned by American General also were paying for other unfair practices, mainly collecting far more money in premiums than the policies were worth.

American General issued a statement supporting the settlement.

"We strongly believe that any pricing based on race is unacceptable and will not be condoned," American General Chief Executive Robert Devlin said. "American General moved swiftly and responsibly to correct the regrettable historical practice of differential pricing."

In all, holders of 9.1 million policies will be eligible for some relief.