The payments are a small part of a $206 million disbursement by American General that was brought on by Florida's Department of Insurance. Last year, the Florida insurance commissioner's office conducted a year-long investigation into the sale of industrial insurance, also known as burial insurance. As a result of the investigation, the state of Florida concluded that American General was collecting higher premiums from African-Americans than from other races.
In April, the Florida insurance commissioner slapped a cease-and-desist order directing American General to stop collecting premiums based on discriminatory rates. A few weeks later, American General announced it would pay $206 million to a total of nine million policyholders.
On Monday, the state of Florida announced that insurance regulators from 26 states had ratified the deal, which now includes a $7.5 million restitution penalty against American General to be split among participating states. "The most important thing was to get relief for the policyholders," said Don Pride, spokesman for the Florida Insurance Commissioner's office. "But the commissioner felt that it was important to send a message that this was wrong, which is where the restitution penalty came in."
A few hours later, Marilyn Elam, spokeswoman for the Tennessee Department of Commerce and Insurance, told NashvillePost.com that Tennessee would get $528,600 of the $7.5 million. Ms. Elam also said that of the 9.1 million policyholders who will receive payment from American General, 79,000 live in Tennessee.
When this story was published, it was unclear what would be done with the $528,600. Both Finance Commissioner Warren Neal and Comptroller John Ferguson were out of town on Monday and could not be reached for comment.
The class action settlement still must be approved by U.S. District Court Judge John T. Nixon, who has scheduled a hearing on September 8 to consider whether the settlement is fair, adequate and reasonable.
American General Life & Accident is a unit of American General Corp. of Houston. The company has made little comment regarding the burial insurance controversy since it became known, and has directed blame to companies that it has acquired over the years. "American General strongly believes that our policyholders should be treated fairly and with dignity and respect," the company told NashvillePost.com in April. "We deeply regret these past actions of some of our predecessor companies."
Before 1960, industrial insurance companies openly sold policies at different costs to different races. But the policy of discrimination based on race was supposed to have been abandoned when every state passed some form of the Unfair Trade Practices Act.
Industrial insurance is a large part of Nashville's economic history. The National Life & Accident Insurance Co. and the Life & Casualty Insurance Co. were primarily in the business of selling industrial insurance. Both were founded at around 1900 and both grew on the strength of their burial insurance policies that targeted African-Americans.
Both National Life and L&C were eventually acquired by American General — L&C in the late 1960s and National Life in 1982.
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