Life Insurance Pricing -- Insurance Forum

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Date Posted: Sun, November 03 2002, 15:22:11
Author: Brent D. Gardner, ChFC
Subject:

Life Insurance Pricing

From Financial Services Online:

METLIFE RACIAL DISCRIMINATION � In a recent press release, Parker & Waichman Attorneys at Law announced they have been "retained by a large number of people to file individual lawsuits against MetLife for its policy of charging African Americans higher premiums than
Caucasians." Policyholders who purchased MetLife policies from 1900-1974 are already part of a class action settlement. However, Parker & Waichman is encouraging policyholders to "explore all of their legal options, including the filing of individual lawsuits.
Parker & Waichman is encouraging our clients to exercise their right to opt-out of this lopsided settlement" and get more money for a groundless law suit. A "loser pays" legal system like the UK would stop a lot of this nonsense.
////////

I have seen actuarial data that supports a difference in pricing for men and women. I have seen actuarial data that supports a difference in pricing between smokers and non-smokers, or tobacco users and those who never use any. I have seen lots of similar actuarial data that supports pricing according to the risk, such as age, occupation,
avocation, health, lifestyle, integrity, birthplace, where they currently reside, travel history, credit rating, et al.

I have also seen actuarial data that supports pricing differences between the various races for life and health insurance.

Its not about discrimination, but properly pricing the insured risk.

Interestingly enough, years ago, the companies that priced according to the risk differences between races decided to stop because of politics. Yes, they stopped. The year varies between companies, but the large companies that I now about stopped in the 1950s. And as a result, they suffered losses greater than their global pricing
allowed, which negatively impacted profits (and dividends to policyholders of mutual companies). And the companies aren't complaining.

Now they are being sued for doing what they thought was the right thing to do, even if it wasn't the most profitable choice. Frankly, I think they should go back and rescind those policies since they were inappropriately priced, or give the insured the option of paying the
appropriate premium.

I guarandamntee that if this went to a literate, educated jury, other than one in certain counties in Alabama or Mississippi, the company would win. They can prove, beyond ANY doubt whatsoever, that appropriatley pricing a risk is in the best interest of both the company AND the insured/policy owner.

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