Nickel-and-dime-ing customers to death

Former state legislator Henrietta Canty remembers well the times that white insurance salesmen would canvas black neighborhoods peddling “industrial life policies” — policies with face values of $1,000 or less that were in-tended to cover the cost of burial and little, if anything, else. For some, industrial life insurance was the only affordable option, and companies were willing to take them in a little at a time, slowly but surely getting more than the policies would ever be worth.

That’s still the case, as is evidenced by an order issued this week by State Insurance Commissioner John Oxendine.

Oxendine, following the example of officials from several other states and in the wake of a $206 million settlement in a lawsuit against American General Life and Accident Insurance Co. , has declared a “crackdown” on race-based premiums for industrial life insurance policies. The policies, also called burial policies, are usually maintained with premiums of as little as 15 cents per week. Not so long ago, those premiums were collected on a weekly basis by salesmen who knew exactly when their customers got paid at their industrial level jobs — the demographic that gave the policies their name.

Oxendine’s order to cease and desist collection of premiums on the policies was directed at 23 companies his office has determined are still making money from industrial life insurance in Georgia. Ironically, two of those companies are among the oldest and largest black-owned and operated businesses in the country.

Atlanta Life Insurance Co., founded by a former slave in the early 1900s, has assets of about $200 million. North Carolina Mutual Life Insurance Co. is even older, and was also founded by African Americans.

Justin Johnson, vice president of Atlanta Life, was surprised to see Oxendine’s order aimed at his company. He admits that Atlanta Life still has industrial life policies “on the books” and is still collecting premiums, but the company stopped selling the policies more than a decade ago. He denies that Atlanta Life’s premiums on the policies are race-based.

“It’s not as if we’re offering one rate to whites and another to blacks, so the premiums could not be race-based,” he says. He says industrial life insurance policies are better than nothing and if some customers can’t afford sturdier policies, why should they be denied less-expensive coverage?

But he admits that industrial life insurance doesn’t make as much sense as it used to.

“Frankly, people are living longer now than they used to,” he says. “It used to be that a person might live 10 or 20 years after buying the policy. Now they’re living 40 or 50 years after buying a policy. During that time they may pay in more than the policy’s face value, but that’s the nature of insurance.”