Northwestern Journal of Law and Social Policy

How people count and measure embodies certain assumptions about the thing they are counting; this was true in the nineteenth century, and it is equally true today.¹

[E]ver since the 1880's, Negroes have been subject to differential treatment by white insurance companies in that some of them, at that time, started to apply higher premium schedules for Negro than for white customers, whereas others decided not to take on any Negro business at all. The underlying reason, of course, is the fact that mortality rates are much higher for Negroes than for whites.²

[I]f the misery of our poor be caused not by the laws of nature, but by our institutions, great is our sin.³

I.    Introduction

¶ 1         Earlier this decade some of America's best-known life insurance companies quietly settled multi-million dollar civil rights lawsuits involving race-based life insurance rates and benefits.⁴ As a result, those companies closed a chapter of American economic history that began after the Civil War with door-to-door marketing of small individual life insurance policies to protect poor workers and their families from the indignity of a pauper's burial.⁵ The closing of this chapter in history also marked the end of a form of Jim Crow race discrimination largely invisible to the American public.

¶ 2         Although the settlements provided partial recompense to black Americans harmed by the continuing effects of policies sold during the Jim Crow era, the litigation itself did not accomplish a broader shift in commercial practice. Litigation brought under Civil War-era civil rights statutes⁶ primarily served as a "mop-up" operation following the industry's elimination of race-based practices for most new policies issued after the beginning of the modern civil rights era. Under pressure from civil rights advocates, for example, the Metropolitan Life Insurance Company eliminated explicit race-based rates for some new policies as early as 1948.⁷ By the early 1960s, industry professional organizations had developed and approved race-integrated mortality tables as an industry-wide standard.⁸ Thus, by the time the Civil Rights Movement had accomplished landmark legal and legislative changes in education, public accommodations, employment, housing, and voting rights, the biggest players in the life insurance industry had "voluntarily" discontinued their most visible race-based practices for newly issued policies.⁹

¶ 3         This Article traces the evolution of explicit race-based insurance practices over a century as the American life insurance industry responded to changes in the social, economic, and legal status of former slaves. It illustrates and illuminates the complex interaction between civil rights reform and private commercial practice. The story told here, drawn from insurance company and economic histories, NAACP Legal Defense Fund archives, and recently revealed details from state insurance department investigations and civil rights litigation, both affirms and challenges patterns of reform observed by legal historians outside of the private commercial context.

¶ 4         Studies of the development and interpretation of constitutional law have shown that civil rights reforms can provoke backlash that transforms former status hierarchies into more modern or private forms of discrimination.¹⁰ Recognition of the basic civil rights of free blacks at the end of the Civil War and during the short-lived Reconstruction era was soon followed, for example, by a reformulation of the legal status of former slaves.¹¹ After ratification of the Thirteenth, Fourteenth, and Fifteenth Amendments to the United States Constitution, the Supreme Court distinguished between political rights of citizenship and private associational affinities, ushering in the Jim Crow era of state-sanctioned social and economic segregation that persisted until the mid-twentieth century.¹² As observed by legal historian Reva Siegel in another context, "civil rights reform does not simply abolish a status regime" but "in important respects, it modernizes the rules and rhetoric" used to justify and enforce the former status hierarchy.¹³

¶ 5         When careful attention is paid to how race-based insurance pricing practices developed, an analogous privately imposed transformation can be discerned here: Private life insurance companies translated former race hierarchies into race-based mortality risk classifications. During a period of racial retrenchment, after free blacks had challenged formerly settled political, social, and legal understandings, private companies reformulated contested status regimes into actuarial risk categories that quantified differences between blacks and whites.¹⁴ Mortality rate differentials led to coverage restrictions and to a dual race-based pricing structure in low-income markets for life insurance.¹⁵

¶ 6         The century-long effort to outlaw race-based pricing practices in the insurance industry illuminates the challenges faced by those who sought reform of this "modernized" private commercial practice. During the Jim Crow era, life insurance companies doing business in newly emerging markets began categorizing blacks as "substandard" mortality risks.¹⁶ Adopted after the rise of scientific racism¹⁷ and rationalized during the ascendancy of the eugenics movement,¹⁸ these race-based practices became firmly entrenched in the life insurance industry.

¶ 7         Legal responses to race-based life insurance practices first appeared in the 1880s, when states began enacting civil rights laws to prohibit race discrimination in insurance. In 1884, for example, Massachusetts explicitly prohibited race-based rates or premiums for life insurance policies; several other northern states had adopted similar laws by the end of the nineteenth century.¹⁹ Major life insurance companies generally resisted legislative efforts to ban discrimination by withdrawing business from those states, by instructing their agents not to solicit black business, or by adopting other less visible race-based practices.²⁰ The resulting segregation and segmentation of life insurance markets lasted well into the modern civil rights era.²¹

¶ 8         Race-based pricing classifications and coverage restrictions proved difficult to dislodge not only because of the structure and legal regulation of private commercial insurance markets,²² but also because of the strength of the underlying ideologies of racial difference, race separation, and the rhetorical power of actuarial language. Legislation and litigation, despite some progress, proved ineffective in changing industry practice.²³

¶ 9         By the mid-twentieth century, the assumptions of scientific racism and the eugenics movement, which had been under attack by public intellectuals in America and Great Britain since the 1930s and 1940s,²⁴ were finally disavowed.²⁵ The shift in commercial life insurance race-based practices began soon after the military defeat of the Nazi regime in World War II and the post-war exposure of the horrors of the regime's "Final Solution."²⁶

¶ 10         After World War II, the struggle for civil rights gained momentum. Unlike civil rights reform in education, employment, housing, and public accommodations, however, the adoption of racially-integrated mortality tables by the insurance industry and the prospective elimination of explicit race-based pricing by the major companies did not, for the most part, require court orders or the enactment of new federal civil rights legislation.²⁷

¶ 11         Instead, civil rights advocates and black customers pressured white insurance companies to change their race-based practices.²⁸ Commercial practice gradually changed after World War II, as noted above, beginning with the equalization of race-based rates and benefits by a leading company in 1948. Just over a decade later, the industry and its regulators developed and adopted race-merged mortality tables.²⁹ Although significant mortality differentials remained between racially classified groups in the late 1940s and throughout the 1950s, improvements in mortality for both black and white Americans gave companies the maneuvering room to equalize rates and benefits as part of overall rate reductions for all policyholders.³⁰

¶ 12         The thesis of this Article is that the industry professionals who reformed industry practice during the modern civil rights era acted in light of a fundamental shift in social and scientific understandings of race. With the repudiation of biological views of race following World War II, and with the growing political momentum of civil rights, the industry could no longer ignore the role played by racism in creating the social and environmental conditions that disadvantaged blacks. Evidence suggests that the discontinuation of explicit race-based pricing classifications by the major players in the private insurance industry resulted in large part from a combination of the transformative event of World War II, the growing influence of the Civil Rights Movement, and post-war marketplace changes. Civil rights legislation adopted during the second Reconstruction of the mid-twentieth century and the broadening social and political movement for civil rights undoubtedly reinforced the need to modify practices for existing and newly issued insurance policies. However, industry norms were already largely reformed by the time litigators sought relief for those still covered by the discriminatory policies of the Jim Crow era.

¶ 13         My inquiry in this Article centers on the development and evolution of race-based insurance classifications and not on whether these actuarial classifications represented an accurate generalization of statistical groupings.³¹ For purposes of this discussion, I'll assume that mortality differences exist to a greater or lesser extent among groups classified by race, sex, national origin, or even religion.³² These differences depend upon whether one looks at mortality statistics for the population as a whole or for those who apply for insurance coverage or some other category, such as urban or rural location, state of residence,³³ occupational group, or time in history.

¶ 14         Researchers have long debated the reasons for classification-based mortality differences, but by the second half of the twentieth century, most tended to agree that the magnitude of each factor changes over time and that these group-defined differences are largely explained by environmental, social, and behavioral factors.³⁴ Whether disparate rates or benefits for individuals based on actuarial differences between groups classified by race, sex, religion, or national origin ought to be permitted requires resolution of conflicting efficiency and fairness concerns.³⁵

¶ 15         Over a period of nearly a century, national civil rights policy eventually discredited explicit race-based pricing of life insurance despite continuing mortality differences when policyholders were grouped by race.³⁶ Gender-based pricing of insurance products, by contrast, is currently a common commercial practice outside of the employment setting.³⁷ The story of the rise and fall of race-based pricing thus also provides important insights and context for those interested in understanding the development of gender-based life insurance pricing practices.

¶ 16         This discussion proceeds as follows. The Article begins in Part II with a brief overview of the historical development of race-based pricing practices and an introduction to the working class life insurance markets in which they developed. Part III, the core of the Article, provides a more detailed examination of the post-emancipation use of explicit race classifications by life insurance companies, the development of segregated life insurance markets, and the discontinuance of race-based pricing practices beginning after World War II. As reinforced by developments during the following several decades, the use of race distinct mortality tables for pricing purposes could no longer be sustained by the major players in life insurance industry.

II.    A Brief Overview of Race Classifications and Insurance Markets

¶ 17         In the decades preceding the Civil War, Americans began to view numbers as a "tool of mastery over both nature and society," as pointed out by Drew Gilpin Faust in her study of the Civil War.³⁸ Moreover, by the mid-nineteenth century Americans had "entered into what historian Patricia Cline Cohen has called 'an infatuation with numbers.'"³⁹ Such quantification, in which "statistics emerged in close alliance with notions of an expanding state," often focused on "censuses, on demography, and on mortality records."⁴⁰

¶ 18         Constructing categories for classifying data involved judgment in the choice of variables by which the data are sorted. In antebellum America, race was a commonly used variable.⁴¹ For example, as noted by Cohen, the 1840 census distinguished lunatics and idiots by race but not by age, sex, or class "because it was assumed that race was the most salient division of the population."⁴²

¶ 19         Because I focus primarily on the post-Civil War period, beginning with the end of Reconstruction and ending with the modern civil rights era, this Article does not examine in any detail the slavery-era history of American insurance and banking interests. The resurgence of interest in black reparations has prompted new disclosures about the slavery-era practices of major American institutions, including insurance companies.⁴³ Insurance companies provided slaveholders coverage for damage to or death of their slaves at rates substantially higher than for white lives and imposed certain coverage restrictions, including confining policy amounts to two-thirds of actual value, and covering only a limited term of years.⁴⁴ Although emancipation ended the slavery-era insurance business,⁴⁵ race-based practices resurfaced in other life insurance markets following Reconstruction.⁴⁶

¶ 20         The Civil War focused attention on "the transience of life in the most dramatic possible way."⁴⁷ After the Civil War, many veterans, both black and white, and their survivors and dependents received benefits computed by reference to the veteran's service entitlement, not by age or life expectancy, under an expanded federal Civil War pension system.⁴⁸ Those included in the system received old age and survivors benefits comparable to pension and social insurance programs later adopted in Europe;⁴⁹ however, many former slaves did not qualify for governmental benefits.⁵⁰

¶ 21         Private businesses also responded to the growing needs of American families for financial security in a period of rapid industrialization, social change, and increased economic vulnerability. As a result, the American life insurance business expanded dramatically from the antebellum period through the Civil War. ⁵¹ A structure for state supervision of the industry also formed at about that time, with the establishment of insurance departments in Massachusetts in 1865,⁵² and the formation in 1871 of a National Convention of Insurance Commissioners.⁵³ By 1873, twelve states had some form of insurance regulation.⁵⁴

¶ 22         Following the Civil War, race-based practices first emerged in a specialized form of life insurance marketed to low-income working people. Beginning in the 1870s, newly formed American life insurance companies, including Prudential, Metropolitan Life, and John Hancock,⁵⁵ known later as the "Big Three,"⁵⁶ sold small individual policies to a growing market of low-income wage earners.⁵⁷ This type of life insurance, called "industrial" or "burial" insurance, provided protection against the financial burden of a last illness and burial for the "industrious" classes.⁵⁸

¶ 23         Although rates and benefits varied by age, they did not vary, at least initially, by race of the insured, and were typically issued with fewer restrictions than other forms of life insurance.⁵⁹ Policies covered poor workers and their families, including newly emancipated slaves,women, industrial workers, and their children.⁶⁰ Industrial insurance agents typically sold policies door-to-door in an assigned geographical area or "debit," and collected premiums of a few cents each week to cover each insured member of the household.⁶¹

¶ 24         By the beginning of the twentieth century, as observed by Louis Brandeis in his Progressive-era study of industrial insurance, industrial policies were "considered a prime necessity among the working people," and constituted approximately three-fourths of then existing level premium life insurance policies.⁶² Industrial insurance remained an important form of life insurance for low-income wage earners until the mid-twentieth century, when the business began to decline.⁶³

¶ 25         After Reconstruction, Prudential and other newly formed industrial insurance companies began classifying former slaves as "excessive" mortality risks.⁶⁴ Prudential introduced a race-distinct rate and benefit structure in 1881, followed later the same year by Metropolitan Life.⁶⁵ Soon thereafter, certain states began prohibiting life insurance companies from charging race-differentiated rates.⁶⁶ Prudential withdrew business from those states and later stopped soliciting black business everywhere.⁶⁷ Metropolitan withdrew its business from states with anti-discrimination laws but continued to sell race distinct policies elsewhere. Metropolitan later resumed business in states with anti-discrimination laws, but adopted other less visible race-based practices in those markets.⁶⁸ Black self-help organizations and black-owned insurance companies formed during the late nineteenth and early twentieth centuries to respond to economic needs unmet by white companies.⁶⁹ As a result, insurance markets became highly race-segregated.

¶ 26         As discussed in greater detail in Part III below, following improvements in living standards after World War II and the reforms sought by the Civil Rights Movement, insurance markets became more integrated, black insurance companies faced new competitive pressures, and explicit race-based rates for newly issued life insurance policies were rejected as a vestige of the Jim Crow past.⁷⁰ By the 1970s, "ordinary" life insurance⁷¹ business had surpassed the industrial business for most major insurers. The original "Big Three" discontinued selling new industrial policies, leaving the industrial market to smaller companies.⁷² Some of the remaining industrial companies did not revise their policies until the early 1980s, or later for a few small companies based in the South.⁷³ A few Jim Crow era policies, issued with higher premiums or lower benefits for black policyholders, may remain in force even today.⁷⁴

III. The Rise and Fall of Race-Based Life Insurance Policies

¶ 27         One of the first studies of race-based practices in the insurance industry to reach a wide audience was An American Dilemma ,⁷⁵ a comprehensive survey of American race relations cited by the Supreme Court in Brown v. Board of Education.⁷⁶ The Carnegie-funded study,⁷⁷ directed over a five-year period in the late 1930s and early 1940s by the Swedish economist Gunnar Myrdal,⁷⁸ examined the issue of race relations across a wide range of categories, including demographics, economics, politics, justice, social stratification, and social inequality. Myrdal's detailed analysis of the conflict between American democratic ideals and racism influenced a generation of judges⁷⁹ and policymakers during World War II and the Cold War period.⁸⁰

¶ 28         In his analysis of the financial industry, Myrdal described how early mutual aid and benevolent societies⁸¹ and post-slavery race-based practices of major insurance companies led to the development of African-American owned and managed insurance companies.⁸² Although Myrdal's summary goes into little detail of the use of race classifications by the insurance business, the underlying survey paper from which he drew his conclusions provides more background and context.⁸³

¶ 29         Additional historical information now available, and events occurring after the 1944 publication of An American Dilemma, tell a story of the insurance business responding to legal and social changes over a period of more than a century. Social and economic changes occurring after the publication of An American Dilemma, including the victory over the Nazi regime in World War II, pressure from the NAACP Legal Defense Fund and other civil rights groups on the issue of race-based rates and benefits, as well as integration of economic markets more generally, led to changes in race-based insurance practices.

¶ 30         Many of the race-based practices of life insurance companies developed after Reconstruction, during a period of social and political retrenchment following the civil rights reforms of the 1860s and 1870s. Shortly after the Civil War, during the short-lived Reconstruction era, Congress established the Freedman's Bureau⁸⁴ and enacted civil rights legislation.⁸⁵ The financial panic of 1873, followed by a severe economic depression and political changes in the North, impeded further efforts at reconstruction in the South.⁸⁶ After 1877, the federal government withdrew its troops from southern statehouses and federal supervision of elections ceased.⁸⁷ Through a combination of terror and violence, including lynching,⁸⁸ and various other less violent means such as poll taxes and literacy tests, white supremacists systematically disenfranchised blacks throughout the South.⁸⁹

¶ 31         At the end of the nineteenth century, the United States Supreme Court, which had earlier issued restrictive rulings on post-Civil War constitutional amendments⁹⁰ and civil rights legislation,⁹¹ upheld state Jim Crow laws in Plessy v. Ferguson.⁹²Plessy ushered in a period of state-sanctioned racial subordination that extended into the latter half of the twentieth century.⁹³

¶ 32         As discussed in greater detail below, the race-based practices developed by the industrial insurance industry mirrored the dominant racial ideology of white supremacy. Classifying blacks as inferior by "nature," and thus as "substandard" insurance risks, race-distinct pricing structures became firmly entrenched in the insurance industry during the Jim Crow period.

¶ 33         The era of state-sanctioned race segregation finally ended at least a decade after the Court's decision in Brown v. Board of Education⁹⁴ with the social and legislative changes accomplished by the Civil Rights Movement during the second Reconstruction.⁹⁵ After a brief introductory discussion of related developments before the Civil War, this section focuses on the rise and fall of race-based insurance practices during the Jim Crow era.

¶ 34         In the late eighteenth century, church relief and mutual aid societies were organized by free blacks in the North, and later in the South, to provide a form of self-help for themselves and their families in the event of sickness and death.⁹⁶ Although mutual aid and benevolent societies had come into existence before the Revolution⁹⁷ and were fairly common among master craftsmen, journeymen, and apprentices, white benevolent and fraternal societies⁹⁸ generally did not open their membership to blacks.⁹⁹ Blacks thus founded their own societies.¹⁰⁰

¶ 35         Black-founded societies served as centers of religious and social activity, and were important factors in the lives of free blacks¹⁰¹ and, to some extent, the slaves.¹⁰² The societies collected small initiation fees and periodic payments. Free black benevolent societies provided aid to the disabled or aged, as well as burial benefits and annuities for the survivors of deceased members.¹⁰³

¶ 36         The growth of benevolent organizations, along with black fraternal organizations and lodges,¹⁰⁴ laid the foundation for the structure of the black insurance business.¹⁰⁵ Over time, benevolent societies and fraternal organizations declined in popularity, while life insurance sold by insurance companies grew in importance as a source of economic security.¹⁰⁶

¶ 37         In the post-Civil War period, newly emancipated blacks encountered serious social and economic challenges.¹⁰⁷ After the Freedman's Savings and Trust Company failed in 1874,¹⁰⁸ many freed blacks became suspicious of banks as repositories for savings.¹⁰⁹ Faced with poverty, illness, and the death of family members, emancipated blacks turned to churches and to fraternal and benevolent organizations for economic and social protection.¹¹⁰ Some former slaves also purchased coverage from industrial insurance companies selling small individual insurance policies designed for low-income wage earners.¹¹¹

¶ 38         The following three sections discuss the parallel development of race-based practices of white insurance companies and the organization and operation of twentieth century black-owned and managed insurance companies. Black-owned life insurance companies developed from the experience with insurance programs provided by late nineteenth century black fraternal and benevolent societies.

¶ 39         Black policyholders first became an important factor for major white insurance companies in the 1870s, the decade after emancipation.¹¹² During that period, insurance companies began selling industrial policies, a life insurance business characterized by small policies and frequent premiums.¹¹³ Premiums were collected house-to-house in multiples of five or ten cents a week, with variations for different ages in the amount of insurance purchased. Coverage could be purchased for every family member.¹¹⁴ Sometimes referred to as "debit" insurance because premiums were collected by company representatives in an assigned fixed area known as a "debit,"¹¹⁵ industrial insurance served mainly to provide wage earners funds for a last illness and a decent burial.¹¹⁶ Because industrial insurance was within the reach of poorly paid workers, companies began selling insurance to former slaves.¹¹⁷

¶ 40         Both the Prudential Life Insurance Company, beginning in the mid-1870s,¹¹⁸ and Metropolitan Life, which issued its first industrial policy in 1879,¹¹⁹ initially issued such policies on blacks at the same rates as whites.¹²⁰ By the beginning of 1881, however, Prudential had begun to charge higher premium rates to cover black children and reduced benefits of black adults by one-third to cover their "excessive" mortality.¹²¹ Metropolitan had stopped writing insurance on blacks,¹²² but resumed writing policies on blacks later in 1881 at two-thirds the benefits given whites.¹²³

¶ 41         In response to these developments, Massachusetts passed a law in 1884 forbidding race-based life insurance rates or benefits.¹²⁴ According to Metropolitan's historian, "[a]fter unavailing protests the companies discontinued soliciting Negro risks in that state."¹²⁵ When several other states passed similar laws,¹²⁶ "Prudential went further and stopped doing business with Negroes everywhere."¹²⁷ The laws could not require the companies to solicit black business, as pointed out by a historian writing about the companies' reaction, and "most companies, Metropolitan included, instructed their agents not to solicit it in those states."¹²⁸

¶ 42         By contrast, other coverage restrictions were significantly liberalized during this era.¹²⁹ Prudential discontinued restrictions on hazardous occupations, except for military service, in 1884.¹³⁰ It briefly eliminated the military service restriction at the end of the century. Neither Prudential nor Metropolitan charged higher rates for members of the armed forces during the Spanish-American War.¹³¹

¶ 43         Metropolitan, unlike Prudential, continued selling to blacks at higher rates in states that did not prohibit race-differentiated rates.¹³² Although Metropolitan continued to sell policies to blacks, careful selection of black risks was "deemed necessary," and "a full medical examination" was required in every case.¹³³ Under those special selection conditions, Metropolitan decided in 1894 that the higher rates for black risks could be discontinued, and blacks were again sold policies at the same premium as whites.¹³⁴ At the same time, solicitation of business in states with anti-discrimination laws resumed.¹³⁵

¶ 44         In 1896, the year of the Supreme Court's decision in Plessy v. Ferguson,¹³⁶ Prudential's statistician, Frederick Hoffman, a German immigrant who had married into a southern white family and lived for a time in the South,¹³⁷ published a study of black mortality rates.¹³⁸ He found that black mortality rates for most age groups were nearly twice those of whites and that at all age groups blacks had a lower life expectancy than whites.¹³⁹ Although Hoffman's later work tied the prevalence of certain diseases in the general population, such as cancer and tuberculosis, to social, economic, and environmental conditions, he did not similarly attribute black mortality to such conditions.¹⁴⁰

¶ 45         Hoffman argued instead that black mortality and black health were the function of innate racial traits of blacks, concluding that the numbers proved that blacks were biologically inferior to whites, and attributed the statistics to their "low state of morality."¹⁴¹ He wrote that "modern educational and philanthropic efforts" had made blacks even more "dependent on the white man" than slavery, and rejected the idea that private charity or public programs could change the social condition of blacks.¹⁴² He viewed blacks as a dying race, and accordingly, not good insurance risks.¹⁴³ Hoffman's mortality studies also provided a "scientific" justification for race discrimination more generally.¹⁴⁴

¶ 46         In 1907, new industrial mortality tables were adopted,¹⁴⁵ and the underlying data showed that black mortality rates were substantially in excess of white mortality rates.¹⁴⁶ Rather than continue to write policies on the same premium rates, which the Metropolitan historian noted, "would have been discrimination against the whites," the company adopted a new policy.¹⁴⁷ A set of plans were prepared "on a basis providing for extra mortality, with cash values computed on [] special tables and dividends based on the actual mortality experience," along with a line of plans for persons of standard mortality.¹⁴⁸ When a black person was issued a standard policy rather than a policy for substandard risks, the extra mortality was taken into account by allowing no issue commission to the agent.¹⁴⁹

¶ 47         As a result, race and age again became major defining classifications for Metropolitan in computing rates and benefits provided under the policies. At that time, insurance company experience showed comparable or greater mortality rate differentials at certain ages when industrial policyholders were classified by gender,¹⁵⁰ as by race.¹⁵¹ However, despite those mortality differentials, the industrial companies did not adopt gender differentiated premiums or benefits. White men were generally treated more favorably as a group for pricing purposes than white women, who had lesser average mortality than white men at many age ranges, or than black women, who had average mortality nearly comparable to that of white men at certain age ranges.¹⁵² Accordingly, despite men's greater average mortality risk when compared to women, men other than black men were not generally treated as "substandard" risks for life insurance. The companies thus treated white men as the "norm" for standard pricing purposes.

¶ 48         The 1907 industrial mortality table remained in general use until 1948.¹⁵³ In the early 1940s, a new updated industrial table was created.¹⁵⁴ At that time, a separate "substandard" table was also constructed.¹⁵⁵ As described by a leading insurance textbook, the substandard table was "for the use of companies that write predominantly Negro lives."¹⁵⁶ A study of mortality rates experienced by industrial companies published prior to adoption of the new tables showed overall improvement in mortality for both blacks and whites. The race differential remained, however, averaging eighty-three percent higher than white mortality, but well over twice as high at certain ages.¹⁵⁷

¶ 49         From the mid to late 1930s, Metropolitan and other white insurance companies had been under increasing pressure from the civil rights community to end their race-based practices in various markets.¹⁵⁸ In 1947, the United Office and Professional Workers of America, a union affiliated with the Congress of Industrial Organization (CIO), began a campaign against race discrimination in insurance by writing letters to Metropolitan, the CIO Committee to Abolish Discrimination, the National Urban League, the NAACP, and state insurance commissioners around the country, reporting the results of its survey finding that black applicants were restricted in certain cases to substandard forms of insurance and that limitations were put on commissions to agents.¹⁵⁹

¶ 50         For Metropolitan, the rates for policies issued under the new industrial mortality tables were more favorable than the rates on policies issued under both the former standard and substandard industrial policies. In 1948, the company began equalizing the future death benefits on all existing premium paying and paid-up industrial policies, and eliminated substandard risk plans prospectively.¹⁶⁰ In 1963, guaranteed nonforfeiture values on premium paying industrial policies were also increased for older policies in the same proportion.¹⁶¹

¶ 51         In the early 1960s, a new "race-merged" or "integrated" industrial table, the Commissioners 1961 Standard Industrial Mortality Table, was developed and constructed from the 1954-1958 mortality experience of white males and females from eighteen companies.¹⁶² Rather than produce separate standard and substandard tables, "[s]ubstantial margins were introduced into the basic data to allow for difference in company underwriting standards and the racial composition of the policyholder group," with the level of margins determined "in part by an examination of the experience for the same period of eleven smaller companies, as well as some combined white and nonwhite data."¹⁶³

¶ 52         In its report to the National Association of Insurance Commissioners on the development of the proposed new table,¹⁶⁴ the industry advisory committee noted the difficulty of determining suitable margins when developing a valuation table for general use throughout the country.¹⁶⁵ The report observed that it had been common practice in the past to price policies by race.¹⁶⁶ However, the report also noted "a greater tendency" to depart from past practice:

In the past, it has been common practice to use substandard rates and values for non-white lives, and many companies still follow this practice. While the evidence which your Committee has developed demonstrates conclusively an improvement in Industrial Mortality on standard lives over the past twenty-five years, there is a greater tendency for companies to use the same policy forms, valuation and non-forfeiture bases, etc., for non-white as for white business and, in many companies, there is an increasing proportion of Industrial business written on non-white lives. It is conceivable, therefore, that Industrial mortality, overall, in the future may not improve but may, in fact, become higher. In their deliberations on the appropriate level of loading, the Committee, therefore gave some consideration as to what the level of mortality in the valuation table should be to cover experience of the companies on all of their Industrial business, white and non-white combined.¹⁶⁷

¶ 53         Although industrial insurance remained an important form of insurance for private insurance companies at least into the 1950s,¹⁶⁸ the industrial business began to decline thereafter.¹⁶⁹ In the first half of the twentieth century, the increased wages of workers led to an expanding market of potential policyholders as well as a gradual merging of the industrial and group insurance markets.¹⁷⁰ Thus, companies increasingly aimed their marketing efforts at members of the middle class.¹⁷¹

¶ 54         As incomes of workers increased, they could more often afford to purchase intermediate, ordinary, or other forms of insurance that provided greater coverage than industrial policies.¹⁷² By the late 1960s, Metropolitan, Prudential, and John Hancock, formerly known as the "Big Three," had discontinued writing new industrial policies,¹⁷³ and held only about thirty percent of the industrial insurance in force at the end of 1970.¹⁷⁴ Of the remaining companies selling industrial insurance, as well as ordinary life insurance, most were located and principally operated in the southeast United States.¹⁷⁵ Of the companies selling industrial insurance exclusively, many were located in Louisiana because of specific provision under Louisiana state law for the operation of burial insurance and industrial companies.¹⁷⁶

¶ 55         Civil rights litigation in Louisiana,¹⁷⁷ involving nearly three hundred companies that sold industrial policies over a fifty to sixty-five year period during the twentieth century,¹⁷⁸ reveals the continuing impact of prior race-based practices in the industrial insurance market.¹⁷⁹ Although facts that developed in the course of the litigation indicate that none of the companies sold policies with race-based premiums or race-based benefits after the early 1970s,¹⁸⁰ many older policies still remained in force.¹⁸¹ Beginning in 1988, some insurers voluntarily adjusted premiums and/or benefits to equalize the amount of coverage per premium dollar, but some policies were terminated without adjustment, and other existing policies were not adjusted.¹⁸² Some policies sold in the Jim Crow era containing racially unequal premiums or benefits thus remained in force in the twenty-first century.

¶ 56         During the last decade, certain states have required disclosure of historical race-based practices of companies licensed to do business in their states.¹⁸³ Although some states have focused their investigations on slavery-era practices, other state regulators, including the New York State Insurance Department, have required disclosure of post-slavery and twentieth century practices.¹⁸⁴ Following those disclosures and follow-up investigations, several major life insurers, including Metropolitan and Prudential, settled class action lawsuits alleging racially discriminatory past practices in the industrial insurance market.¹⁸⁵

¶ 57         As the race-based policies of white insurance companies¹⁸⁶ in the late nineteenth century evolved, black fraternal and benevolent societies¹⁸⁷ added insurance features to their benefit programs.¹⁸⁸ This section describes the development of an innovative fraternal insurance program¹⁸⁹ that led to development of a major black insurance company. It focuses on the story of one fraternal organization as an example of the type of economic and racial dynamics that led to significant segregation of markets during the Jim Crow era.

¶ 58         One of the largest and most successful black benevolent organizations, the Grand Fountain, United Order of the True Reformers (hereinafter "True Reformers"), was formed in 1881, and headquartered in Richmond, Virginia.¹⁹⁰ The True Reformers, described by Booker T. Washington as "one of the first large secret orders formed by Negroes,"¹⁹¹ and by W.E.B. Du Bois as "probably the most remarkable Negro organization in the country,"¹⁹² established an extensive insurance program.¹⁹³ Between its founding and the year it failed, its lodges paid out to its members nearly three million dollars in sick and death benefits.¹⁹⁴

¶ 59         Organized by a former slave named William Washington Browne,¹⁹⁵ the True Reformers developed out of Browne's involvement with a group associated with the Independent Order of Good Templars, a fraternal organization known for its promotion of temperance and prohibition.¹⁹⁶ Through this association with the Good Templars, Browne became aware of the benefits, such as burial and life insurance, provided to the members of white fraternal organizations. During the 1870s, there was a growing division within the Good Templars regarding racial integration of the organization.¹⁹⁷ The American lodges resisted integration,¹⁹⁸ and by 1876, Browne had organized an Alabama branch of the all-black True Reformers.¹⁹⁹ After accepting an invitation in 1880 to become leader of the True Reformers organization in Virginia, Browne settled in Richmond, Virginia.²⁰⁰

¶ 60         Under Browne's leadership, and that of his successor, W.L. Taylor, the True Reformers expanded greatly. By 1903, according to contemporary reports, there were 2097 Fountains across the country and 269 employees.²⁰¹ Seven years later, the membership roll of the True Reformers had grown to over 50,000, and the organization could be found in over twenty states.²⁰² The organization established its own bank, the True Reformers' Savings Bank of Richmond, Virginia.²⁰³ It also operated its own newspaper,²⁰⁴ old-age home,²⁰⁵ retail stores,²⁰⁶ a 150 room hotel,²⁰⁷ and developed land for an all-black community in Richmond called Brownesville.²⁰⁸

¶ 61         Recognizing the difficulties blacks encountered with white insurance companies, Browne sought to provide insurance coverage to members, including policies that would provide relief to beneficiaries and cover burial costs.²⁰⁹ Utilizing mainstream financial practices in insurance and other businesses, he initiated several important innovations. Soon after its formation, the True Reformers became the first black benevolent society to disburse insurance benefits through a national office.²¹⁰ He also instituted a sliding scale for insurance policies dependent upon the age and premium paid by the policyholder.²¹¹ When the True Reformers began this practice in 1885, it was customary for such organizations to charge everyone below the maximum age for membership the same premium or assessment regardless of age or risk.²¹² The True Reformers would later require applicants to take a medical questionnaire and, in some cases, undergo a medical examination.²¹³

¶ 62         Although the True Reformers developed their insurance program into one of the most advanced enterprises of its kind undertaken by a black benevolent society, the revenues earned by the organization from its insurance policies also played a role in the financial collapse of the organization. The money collected for insurance was used, through the bank, to finance other business enterprises that the Order managed.²¹⁴ Through a combination of unprofitable investments, poor recordkeeping, and poor management by officials of the bank, the True Reformers Savings Bank became bankrupt in 1910, and a court ordered the directors of the bank to close in late October of that year.²¹⁵

¶ 63         After the savings bank was ordered to close, the insurance commissioner barred the organization from accepting any new members in the state.²¹⁶ Although the insurance commissioner reissued the True Reformers an insurance license in April of 1911, the organization could not overcome the problems it faced following the bank's bankruptcy.²¹⁷ The True Reformers never regained its earlier prominence. Membership declined dramatically in 1911; by 1912, there were only five thousand members, and after the Great Depression, it became virtually nonexistent.²¹⁸ Its legacy survived, however, through the influence of many of its former employees, including Richmond's Maggie L. Walker,²¹⁹ who used the skills and vision she developed with the True Reformers to create other black businesses and insurance enterprises during the Jim Crow era.²²⁰

¶ 64         In the section of An American Dilemma dealing with economics and finance, Myrdal observed that black businesses tended to operate in highly race-segregated markets, and that many insurance companies were founded by blacks in response to race discrimination by white insurance companies.²²¹

¶ 65         During the period between 1880 and 1910, many insurance companies founded by blacks began selling insurance in the South and in urban areas with large African-American communities.²²² At least initially, they operated under fraternal assessment and mutual benefit charters, which had smaller initial capital requirements than those of legal reserve companies.²²³

¶ 66         Black-owned companies faced difficulty in attracting capital, in part due to the negative effect of Hoffman's 1896 book, Race Traits and Tendencies of the American Negro.²²⁴ Later, some of these companies were converted to legal reserve companies. In other cases, officers and employees of these early relatively unregulated and undercapitalized companies left them to found legal reserve companies.²²⁵ These early companies built on the earlier experiences and traditions of black fraternal and benevolent societies, especially those of the True Reformers.²²⁶

¶ 67         Several former True Reformers founded and became presidents of some of the most successful black insurance companies that emerged in the first half of the twentieth century.²²⁷ For example, North Carolina Mutual, the nation's oldest black insurance company, was founded in 1898 as an assessment association by former True Reformers John Merrick and A.M. Moore,²²⁸ and converted to a legal reserve life insurance company in 1913.²²⁹ North Carolina Mutual weathered the Great Depression, a time when many insurance companies failed, and at the beginning of the twenty-first century was licensed to do business in twenty-four states and the District of Columbia, with over $12 billion of insurance policies in force.²³⁰

¶ 68         Myrdal reported that in 1939, there were sixty-seven black-founded insurance companies that had survived the Great Depression, giving employment to about eight thousand workers.²³¹ However, he concluded that it was "difficult to see a real future for a segregated Negro financial system," and that it was a "poor substitute" for what was really needed—employment in white-dominated financial institutions and "more consideration for them as insurance or credit seekers."²³²

¶ 69         By the late 1960s, the forty-six company members of the National Insurance Association (formerly the National Negro Insurance Association)²³³ employed twelve thousand workers, including eight thousand agents.²³⁴ They "had assets of $418 million, insurance in force of $2,330 billion, and a premium income in excess of $115 million."²³⁵ As insurance markets became more integrated following the Civil Rights Movement, however, black companies encountered increasing competitive pressures from white companies in the products offered to their traditional customer base, as well as work opportunities available to their workforce. Black companies thus sought new customers and business, including group life coverage sold to employers.

¶ 70         A study of black insurance companies, published in 1970, noted that black firms were major targets for white insurers; white firms were "anxious to increase their ratio of Negro employees"²³⁶ and "capture the Negro market."²³⁷ The study concluded that "the combined effect of these two events will ultimately have an impact—and probably detrimental—on those Negro firms that have pioneered in developing both the Negro life insurance market and employment skills and opportunities among black employees."²³⁸

¶ 71         By 1979, black insurance companies had responded to changes in the marketplace by yielding the relatively small market for black ordinary insurance to big companies with superior marketing capabilities and by concentrating their activities on the larger market segment of home service and industrial insurance business that the big companies had abandoned.²³⁹ At that time, only three out of the forty or so remaining minority life insurance companies sold ordinary insurance exclusively; they were small companies or confined primarily to a single state market.²⁴⁰

¶ 72         At the end of the twentieth century, when an executive of a black insurance company predicted that in ten years, "only five African American-owned insurance firms will remain" and the rest will die or merge with other National Insurance Association members,²⁴¹ Myrdal's prediction of a limited future for a segregated financial system had largely come to pass.

¶ 73         Race-based rates did not generally arise in the intermediate²⁴² or ordinary life insurance market²⁴³ until the twentieth century, when companies like Metropolitan noticed that the proportion of black lives in the intermediate branch "had grown to a point where the over-all mortality of the group was being raised significantly."²⁴⁴ The same general approach as in the industrial branch was applied in 1930, but discontinued at the beginning of 1935.²⁴⁵ At that time, a simpler rule was adopted under which the excess mortality was offset by paying only partial commissions on policies issued to blacks.²⁴⁶

¶ 74         In 1935, the New York anti-discrimination law was amended to disallow any distinction due to race in the amount of commissions paid for writing the policy.²⁴⁷ In response, Metropolitan reacted the same way it did in its industrial business when Massachusetts passed a law prohibiting race-based premiums in 1884:²⁴⁸ It discontinued soliciting black customers for any kind of life insurance in New York.²⁴⁹ The black press in New York ran a series of articles complaining about Metropolitan's refusal to sell blacks its full range of products,²⁵⁰ and the New York Temporary Commission on the Condition of the Urban Colored Population announced that it planned to investigate Metropolitan and other companies for alleged "discriminatory practices against Negroes."²⁵¹ Outside of New York, the company continued to maintain its dual race-based commission structure,²⁵² explaining that "where possible" the company had tried to insure black lives but "at rates commensurate with mortality experience."²⁵³

¶ 75         In 1938, when a black policyholder in Brooklyn complained to Metropolitan and the NAACP that he was unable to buy additional insurance from his neighborhood insurance representative, the company explained by letter to the policyholder that "in New York we have found it necessary to assign the collection of colored debits to collectors who are not authorized to sell life insurance to any one, regardless of color" and that "the only change in our practice in New York is that we do not actively solicit applications for insurance from colored persons."²⁵⁴ However, the letter continued, "[s]uch persons may apply at one of our district offices, of which there are a large number conveniently located, and they will receive fair and courteous treatment when they so apply."²⁵⁵

¶ 76         Shortly thereafter, the NAACP issued a press release reporting that Metropolitan, which had "written millions upon millions of dollars of insurance upon Negroes in this country," had ceased to solicit business from blacks in New York,²⁵⁶ and publicized the company's statement that applications for such business would be accepted at the company's district offices.²⁵⁷

¶ 77         The NAACP was also receiving complaints about discrimination against blacks with regard to other types of insurance coverage, including automobile insurance.²⁵⁸ Although the NAACP compiled information and urged investigation of such practices by state agencies, it did not challenge them through litigation. As Thurgood Marshall explained in a letter to Roger Baldwin of the American Civil Liberties Union²⁵⁹ when Travelers insurance company had denied Marshall auto insurance coverage, the company stated that this was because he lived "in a 'congested area,' meaning Harlem, and 'not' because I am a Negro."²⁶⁰ In many cases, the insurance companies relied on facially neutral underwriting factors to explain the denial of coverage, rather than explicit race-based classifications.²⁶¹ Although in Marshall's view, the problem was growing rather than diminishing, it was "practically impossible to work out a court case because the insurance is usually refused on some technical ground."²⁶²

¶ 78         About a decade later, however, a case involving an explicit race-based denial of life insurance coverage came to the NAACP's attention.²⁶³ In the late 1940s, a Wisconsin resident named James Rancher, a student who worked at a shoe repair shop, applied for $1,000 of ordinary life insurance²⁶⁴ under the State of Wisconsin's life insurance fund.²⁶⁵ The state's life insurance fund had been established in 1911 in response to certain problems identified with industrial insurance.²⁶⁶

¶ 79         The state's application form asked for Rancher's nationality and race, which he completed as "American Negro."²⁶⁷ Although legislation forbidding life insurance companies to engage in rate or other discrimination between blacks and whites had been introduced in Wisconsin several times during the 1930s, those bills were not enacted into law.²⁶⁸

¶ 80         Rancher's application was rejected by the state insurance commissioner in 1949, on the ground that all Negroes and other non-Caucasian races were "substandard" insurance risks, and thus ineligible for coverage.²⁶⁹ In making that determination, the commissioner relied on the greater mortality experience of insured blacks, which in 1940, was approximately 150% of the mortality among insured whites.²⁷⁰ In addition, the commissioner maintained that under the governing statute, he was not authorized to issue policies at rates other than those based on the American Experience Table of Mortality,²⁷¹ except for those in hazardous occupations.²⁷² The commissioner therefore rejected all non-white applications.²⁷³

¶ 81         Rancher challenged the denial of coverage in federal court, and when the state insurance commissioner sought a declaratory judgment in state court regarding his interpretation of the governing statute, Rancher filed a counterclaim.²⁷⁴ The state trial court held that the rejection of his application on the basis of race constituted a proper interpretation of the statute, and that the statute did not violate the Equal Protection Clause under either the state or federal constitution.²⁷⁵

¶ 82         The trial court found as a factual matter that the commissioner's classification of blacks as substandard risks was based on the substantially higher mortality rate among blacks than among whites.²⁷⁶ Although extensive testimony was received at trial tending to show that higher mortality rate of blacks as a group was due to environmental rather than physical differences,²⁷⁷ the trial court found that evidence to be inconclusive.²⁷⁸ Although the evidence also showed that a few insurance companies granted life insurance to blacks upon the same basis as whites,²⁷⁹ the trial court found that most large private companies had not accepted classifying risks without regard to race. Life insurance companies would generally differentiate between blacks and whites by charging a higher premium for insuring blacks, or allowing a lesser commission to agents for selling insurance to blacks, or limiting the solicitation of blacks.²⁸⁰ The trial court viewed the classification as reasonable and germane to state statutory requirements, which did not permit the commissioner to insure blacks at premiums in excess of the standard premium rates.²⁸¹

¶ 83         On appeal, the Wisconsin Supreme Court, in Lange v. Rancher,²⁸² reversed the trial court ruling and held that that the insurance commissioner had "failed to show that the racial classification [was] the only one which will achieve the purposes for which the State Life Fund was created."²⁸³ The court required the commissioner to use a race-neutral classification, unless he could show that race itself was a decisive factor in the unfavorable mortality experience.

¶ 84         Unlike the trial court, the Wisconsin Supreme Court did not view the practices of private insurance companies to be controlling and emphasized that the case involved an individual applicant, not a group.²⁸⁴ There was evidence in the record that some blacks "whose applications [were] properly screened and evaluated would have a mortality equal to that of white persons."²⁸⁵ The court concluded that the summary rejection of Rancher's application without investigation or evaluation, under standards applied to white applicants, did not comply with the provisions of the statute.²⁸⁶

¶ 85         Because the statute itself, properly construed, required equal treatment of black and white insurance applicants, the court did not base its conclusion on equal protection grounds under the federal or state constitutions.²⁸⁷ In addition, because the case dealt only with the state-sponsored insurance fund, the Wisconsin Supreme Court's 1953 decision in Lange v. Rancher did not reach the race-based practices of private commercial insurance companies.

¶ 86         However, by the early 1950s, private insurance companies began modifying their race-based ordinary insurance practices. For example, in 1951, Metropolitan authorized its agents to solicit African-American business in New York, subject to the same rules on commissions that applied to white lives.²⁸⁸ By the end of 1954, it had eliminated most of its rules on race-based commissions,²⁸⁹ and by 1958, with the possible exception of agents operating under old renewal agreements, all race-based practices with regard to dual commissions had ceased.²⁹⁰ Nevertheless, at least through the mid-1960s, the company engaged in other race-based practices, including collecting information about the race of insurance applicants, imposing different policy limits and medical examination requirements on black applicants, and applying different financial reporting standards for non-white applicants or for white applicants in interracial marriages.²⁹¹

¶ 87         When Myrdal conducted his influential survey of race relations in America,²⁹² prominent individual American scientists, including anthropologist Franz Boas and several of his former students, had for several decades been challenging the biological understanding of race in various scientific circles.²⁹³ In the 1930s and early 1940s, Boas and his associates began organizing and writing statements aimed at the general public against the "scientific" racism of the Nazi regime.²⁹⁴

¶ 88         The broader scientific community also began to take a public position against the Nazi regime's racial theories in anti-racist declarations. In December 1938, an anti-racist Scientists' Manifesto was released at a news conference with over twelve hundred signatures, including three Nobel laureates and sixty-four members of the National Academy of Scientists.²⁹⁵ In addition to statements signed by individual scientists, American academic organizations and scientific societies began issuing anti-racist statements in 1938. These included the American Association of University Professors, which protested against totalitarian persecution of teachers "on account of their race, religion, or political ideas,"²⁹⁶ the American Anthropological Association, which approved a resolution against Nazi classification of race, and the Society for the Psychological Study of Social Issues.²⁹⁷ The repudiation of scientific racism continued into 1939 when a group of leading geneticists at the International Congress of Genetics issued an anti-racist Geneticists' Manifesto,²⁹⁸ and culminated in the 1950 U.N. Educational, Scientific, and Cultural Organization (UNESCO) declaration on "The Race Question."²⁹⁹ Representing the "most modern views of biologists, geneticists, psychologists, sociologists, and anthropologists,"³⁰⁰ the UNESCO statement declared: (1) that the mental capacities of all races are similar; (2) that no evidence for biological deterioration as a result of racial mixing or hybridization existed; (3) that "genetic differences are not of importance in determining the social and cultural differences" between groups of people; and (4) that for all practical social purposes, "race is not so much a biological phenomenon as a social myth."³⁰¹

¶ 89         Fifteen years earlier, as explained in the introduction to UNESCO's statement on race, the European scientific community had failed to issue a definitive statement on the race question at a conference organized by the International Institute of Intellectual Co-operation, a project that it "had to abandon in deference to the appeasement policy of the pre-War period."³⁰² As noted by Elazar Barkan in his study of the refutation of scientific foundations for racism, the UNESCO statement illustrates the major shift that occurred between the two world wars, when biological explanations of race were largely replaced by cultural or environmental analysis.³⁰³

¶ 90         When scientists rejected the notion of innate or "natural" racial traits, the original rationale for race-distinct pricing in insurance was undermined. If race-classified mortality differentials were largely related to the social, economic, and environmental conditions experienced by black Americans—conditions that were then under attack by the Civil Rights Movement as closely tied to the Jim Crow system of legalized racial separation and subordination—then pricing differentials based on the race of individual policyholders could no longer be justified or sustained by the industry.

¶ 91         As discussed above,³⁰⁴ in the early 1960s, race-merged industrial mortality tables were developed with the assistance of private industry actuaries³⁰⁵ and approved by industry regulators to replace the racially identified "standard" and "substandard" mortality tables first adopted in 1907, and later revised in 1941. The influence of professional societies of actuaries in this process under the supervision of the National Association of Insurance Commissioners permitted change on an industry-wide basis. These changes brought the industry more in line with prevailing scientific views. In addition, the industry's rejection of race-based practices and the adoption of race-merged tables showed growing responsiveness to civil rights concerns.

¶ 92         In sum, the development of a standard race-integrated or race-merged table followed in the decade after a consensus developed within the politically involved scientific community that racial difference reflected cultural rather than biological difference. The consensus of important figures in the scientific community, which could not be achieved in the mid-1930s given the political context in pre-war Europe, was finally reached following World War II. Because of the role of industry groups within the profession of actuarial science, prospective change could be made on a broad industry-wide basis. Although insurance companies would continue to factor mortality experience of their policyholders into their overall cost analysis, the biggest "mainstream" companies no longer used race-distinct mortality tables to maintain dual-rate pricing structures.

IV. Conclusion

¶ 93         As Oliver Wendell Holmes observed in The Path of the Law, published shortly after the United States Supreme Court decided Plessy v. Ferguson, "[w]e do not realize how large a part of our law is open to reconsideration upon a slight change in the habit of the public mind."³⁰⁶ A similar dynamic applies to reconsideration of private commercial practice.

¶ 94         Race-based insurance practices both mirrored and reinforced the racial assumptions and hierarchies of the surrounding political, scientific, economic, and social culture of the times.³⁰⁷ Reflecting "the habit of the public mind," they proved highly resistant to change until the underlying racial assumptions were challenged by the transformative event of World War II and by the post-war Civil Rights Movement.³⁰⁸

¶ 95         Like Jim Crow state-sanctioned race segregation, which prevented "an enforced co-mingling of the two races,"³⁰⁹ the insurance industry justified and enforced Jim Crow race-based practices by reference to inherent or natural racial differences.³¹⁰ After Reconstruction, life insurance companies began insuring emancipated slaves at two-thirds the benefits provided to white policyholders.³¹¹ Although the values echoed slavery era racial hierarchies, the companies explained the change by reference to the "excessive mortality" and "innate" racial traits of former slaves. Race-categorized mortality differentials quantified those differences and classified policyholders as "standard" and "substandard" risks. Race-based pricing structures thus underscored the dominant ideological assumptions about racial superiority and inferiority.³¹²

¶ 96         By contrast, where observable mortality differentials did not reinforce background status hierarchies, they tended to be disregarded for pricing purposes. For example, the industry's mortality experience in the late nineteenth century and beginning of the twentieth century showed mortality differentials among industrial policyholder groups classified by gender that approached, and at certain ages exceeded, the differentials observed in groups categorized by race. Although males on average experienced greater mortality than females, the industry maintained sex-merged mortality tables and gender-neutral pricing in those markets.³¹³ Thus, the industrial companies generally did not charge males, other than black males, higher rates as "substandard" risks.

¶ 97         When Jim Crow segregation came under attack in the second Reconstruction following World War II, the underlying justifications for race-based pricing were finally discredited. The repudiation of scientific racism after the defeat of the Nazi regime led to a fundamental rethinking of race. Cultural and environmental understandings replaced "natural" and "biological" explanations of race. When the Civil Rights Movement successfully attacked Jim Crow for its role in creating and maintaining unequal social and environmental conditions, the insurance industry could no longer sustain higher rates or coverage restrictions for black Americans based on "substandard" mortality categorized by race.

¶ 98         Beginning in the late 1940s, a leading industrial life insurance company, under increasing pressure from the Civil Rights Movement, began equalizing rates despite continuing race-correlated mortality differentials. Later, the industry achieved a form of collective action in the early 1960s, with the development of race-integrated tables by industry professional groups, approved for state regulatory purposes by the National Association of Insurance Commissioners. Thus, by the time the Civil Rights Movement achieved landmark legal and legislative reforms in the mid-1960s, the life insurance industry had adopted a race-integrated mortality table and the leading companies had voluntarily discontinued explicit race-based pricing practices for newly issued policies.

¶ 99         Shortly thereafter, the former "Big Three" industrial companies (Prudential, Metropolitan, and John Hancock) withdrew from the industrial insurance market by discontinuing the sale of new industrial policies. They left that business to smaller or historically black companies operating primarily in southern markets. The bigger companies aimed their future marketing efforts at the more prosperous middle class, including black policyholders who could afford ordinary life insurance.

¶ 100         Earlier state legislative efforts to eliminate explicit race-based pricing had been largely ineffective in accomplishing lasting reform. Beginning in the late nineteenth century, several Northern states passed laws prohibiting differentials in life insurance premiums or benefits solely on the basis of race. These state laws rejected race as a classification category. Although individuals could be classified on some other basis such as health or habits, they could not be placed in a lesser rating category solely on the basis of race.³¹⁴

¶ 101         Some companies responded by adopting other types of less visible practices to limit their risk, such as more stringent medical examinations or credit checks for all black applicants. Others pulled their business from those states or thereafter declined to solicit black business anywhere.³¹⁵ The resulting market segmentation led to racial segregation of insurance markets and the development of black-owned insurance companies, mirroring patterns of race separation, subordination, and segregation found more generally in America during the Jim Crow era.³¹⁶ Not until the end of the twentieth century did many of the smaller companies change their dual rate practices; some did not eliminate them until faced with state insurance department investigations or lawsuits by black policyholders.³¹⁷

¶ 102         In conclusion, as history shows, given the structure and regulation of life insurance markets, lasting reform could not be accomplished state-by-state or market-by-market. Change came from a form of collective action by life insurance industry professional groups, which was achieved only after a fundamental rethinking of race, a "change in the habit of the public mind" that led to reconsideration of long-established commercial practice.

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