Civil Rights

Historically, racial discrimination existed in life, health, and disability insurance coverage as it did in many aspects of life. At one time, the benefits payable to black insureds on some insurers' policies was two-thirds of that payable to white insureds based on allegedly shorter life spans for black insureds than for white insureds. When several legislatures adopted statutes that prohibited charging different rates for life insurance on account of race, some insurers stopped soliciting black insureds, some restricted the types of policies they would sell to black insureds, and some stopped selling to black insureds altogether.

Several changes over the years have reduced racial discrimination in insurance coverage to a minimum. The 1870 Federal Civil Rights Act was passed to ensure that all persons in the United States had the same rights to make and enforce contracts. A violation of such Act by an insurer against a certain race may give rise to a private cause of action. Also, substantial increases in the life expectancy of black people due to improvements in medical science and living conditions have removed the reasoning for charging higher rates merely based on the fact than an insured was black. In addition, the insurance industry began recognizing that it was socially unacceptable to set rates and draft policy provisions in a discriminatory manner.

Today, subtle examples of racial discrimination still exist in the insurance industry. Some insurers still sell to a predominantly white market because sales in non-white markets may increase risks that would have to be paid for out of a rate that was set without consideration of a non-white risk cost. Also, insurers that do sell to non-white markets may set higher rates because of the adverse selection in those markets. However, an increase in the number of black-owned insurers has led to an increase in the concentration of marketing to black insureds.