AUSTIN, TX - AP - American National Insurance Co. has agreed to pay more than $3 million to thousands of black and Hispanic consumers nationwide whose policies were affected by race-based pricing, Insurance Commissioner Jose Montemayor said Wednesday.
"This settlement is another step in correcting past practices that were just plain wrong," Montemayor said. "The restitution will help restore the value that otherwise would have been available without consideration of race."
Galveston-based American National denied that it violated insurance laws or regulations, but issued a news release saying it entered into the settlement "to resolve the concerns of the various state insurance departments in favor of its policyholders and put to rest all regulatory issues arising from or in any way related to the use of racially differentiated premium rates."
Gary Tolman, senior vice president for corporate affairs, declined to comment further, citing pending class-action lawsuits.
The Texas Department of Insurance said the settlement affects small life insurance policies, commonly known as industrial life or burial policies. The policies were sold to blacks and Hispanics at a higher cost. American National stopped the practice in 1964 in the sale of new policies, but death and surrender benefits for many older policies were never adjusted, TDI said.
The settlement applies to policies with a face amount of $1,000 or less issued between 1936 and 1939 to blacks and Hispanics and between 1948 and 1964 to blacks and where a surrender or death benefit was paid since Dec. 31, 1959.
TDI said the estimated $3.2 million to $3.5 million in restitution will be provided to approximately 40,000 current and former policyholders or beneficiaries for whom American National still has records and who previously collected death benefits, surrendered their policy or were still paying premiums after Dec. 31, 1959. The company also has agreed to fund a national campaign to try to notify additional policyholders who are eligible to participate in the settlement.
The average benefit increase per policy is about 22 percent, but the actual dollar amount will vary, TDI said.
Other states that signed onto the settlement include California, Louisiana, Oklahoma and Georgia. TDI said besides Texas, those states had the greatest number of affected policies.
American National has set up a toll-free number, 1-866-229-9685, to answer questions about the settlement, as well as a website: www.regulatorysettlement.com. The company's address is P.O. Box 1900, Galveston, Texas 77553-1900.