On the heels of the market conduct litigation and regulatory investigations of the 1990's, a new picture of the life insurance industry is emerging. African-American policy owners are now learning that decades ago insurance companies charged them more for life insurance policies than they charged Caucasians. Much worse, the racial discrimination continues today.

Discriminatory premiums are too frequently encountered in low face value life insurance policies called "Industrial" or "burial" policies. Typically, these policies pay a death benefit of less than $10,000 -- often $1,000 or less. Premium payments for these policies were typically $1.00 or less per week. The premium was collected at the policy owner’s home by an agent handling a "debit" route.

The premium rates for life insurance policies are determined using mortality tables. In the 1930's and early 1940's the insurance industry began to develop mortality tables for industrial life insurance policies which resulted in African-Americans paying more for the same life insurance policies sold to Caucasians. The discriminatory tables were based upon mortality data which, according to some actuaries, justified a distinction between the races. In fact, in a widely disseminated 1896 publication, the Chief Statistician of Prudential Insurance Company laid the foundation for decades of discrimination by concluding:

It is not in the condition of life, but in the race traits and tendencies [of African-Americans] that we find the causes of the excessive mortality. . . . Is it not self-evident that it is the working of the law of physiological heredity rather than the effects of environment that we have here to deal with?

Most life insurers, using industry-sponsored and created mortality tables, began issuing low-face value policies with exorbitant premiums. While this practice largely faded out by the mid-1960's, some insurers then embarked upon a more subtle yet equally discriminatory method of discrimination called "socio-economic" underwriting. Here, insureds who lived in a certain part of town or who held certain jobs (not necessarily more hazardous ones), were charged more for their insurance. The effect, once again, was that African-Americans paid more for life insurance.

The effects of this discrimination continue today. While the life insurance companies are no longer selling policies with increased premiums for African-Americans and may no longer engage in "socio-economic" underwriting, they are still collecting the discriminatory premiums on policies sold decades ago.

Parry Deering Futscher & Sparks represents owners of industrial or "burial" policies in a number of actions throughout the United States.