NAIC Picks Comm. Nelson To Lead Negotiations For Nationwide Settlement On Burial Insurance

June 14, 2000

The National Association of Insurance Commissioners, assembled near Orlando for its summer conference, has named Florida Insurance Commissioner Bill Nelson to lead nationwide settlement negotiations as the primary negotiator with a major insurance company over the charging of higher premiums based on race.

The action expands negotiations that Nelson’s office has been conducting to settle charges that insurance known as “industrial life,” or burial insurance, was sold on a discriminatory basis in Florida during the 1950s and 1960s, and the policies were never adjusted to end the discrimination.

Regulators from all 50 states and the District of Columbia signed the resolution agreeing to work with Nelson in an effort to reach a national settlement. The resolution also calls upon the states to work cooperatively to determine whether other companies have engaged in race-based practices that haven’t been corrected. Evidence of continuing discriminatory premium collections surfaced in response to subpoenas issued by Nelson last October, when he launched an investigation of industrial life sales practices of five insurers that sold the most industrial life policies in Florida.

In welcoming remarks to his fellow regulators on Monday, Nelson said one company has now stopped collecting the discriminatory premiums and is actively engaged in negotiating a settlement of that and other pending issues involving industrial life policies. He said the other companies under investigation also must fully address this injustice, including making restitution to policyholders. “If they delay and obfuscate the issue,” Nelson said, “it will only cost them.”

RESOLUTION
WHEREAS, the Florida Department of Insurance on October 25, 1999, issued investigative subpoenas regarding industrial life and low value life insurance policies sold in Florida, and has engaged in an extensive investigation of these products; and WHEREAS, the investigation indicates that in some cases, industrial life and low value life insurance policies were sold to African-Americans with higher premiums based upon their race; and
WHEREAS, many instances have been uncovered where the initially discriminatory treatment was never corrected to a race neutral practice and is still in force across the nation, with different premiums still being collected based on race, and death benefits not appropriately adjusted; and
WHEREAS, several other states have initiated information gathering and investigations, it is desirable to coordinate state regulatory efforts to provide consistent and fair treatment for affected policyholders, and to address the problem in an efficient and expedited manner; and
WHEREAS the Florida Insurance Commissioner is currently negotiating the first settlement agreement with an industrial life company;
IT IS HEREBY RESOLVED: That the undersigned members of the NAIC, as the chief insurance regulatory officials of their respective jurisdictions, jointly agree to work with the Florida Insurance Commissioner, as the primary negotiator, in consultation with other regulators, on this settlement agreement; and Further, the undersigned members of the NAIC agree to work cooperatively, to utilize existing investigative and information gathering work to the greatest degree possible, and additionally to determine if any other companies have engaged in race-based practices which have not been corrected, and to jointly seek a national negotiated settlement with each of the affected insurance companies which will consider restitution for race-based practices, and other remedies as needed. Further, it is resolved that the members of the NAIC will redirect regulatory analysis of the low value life insurance business, in all its various distribution forms, and will emphasize in this analysis the overriding goal of fair policyholder treatment, not only in terms of market conduct, such as appropriate disclosures, and issues of suitability of the product for the customer, but also addressing the issue of fair value for the premiums paid, and any other related issues, such as sales of multiple policies and appropriate escheat handling; and that the results of this analysis are to be included in detailed proposals for reform, which shall be completed by June 2001, for consideration by the NAIC membership.

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