Black History Month

The Struggle for Life Insurance

February is Black History Month, a time to acknowledge and celebrate the achievements of African Americans who struggled through adversity to accomplish great things.  The history of life insurance for black Americans is a tapestry of alarming setbacks mixed with great strides to get to where the industry is today.

In the late 1700’s, enslaved black Americans started beneficial aid societies on plantations to care for sick families and neighbors and to cover funeral expenses upon their death.  In 1787, the Free African Society was formed in Philadelphia by freed blacks to provide mutual aid and self-help.

The life insurance industry officially started in 1809.  The first life insurance company was established in Philadelphia, insuring people, buildings, ships, etc. against the unexpected.  Philadelphia abolished slavery in 1780, so black people in the city were emancipated.  However, the insurance company would still make money by investing in slave-produced products and collecting premiums from insured ships that carried shackled African people to American auction blocks.

In 1810, the first African American insurance company was established in Philadelphia. The African Insurance Company was patterned after the Free African Society.

In 1853, another life insurance company started marketing policies specifically to black Americans.  In 1854, they advertised that they were “fully prepared to insure the lives of slaves.”  The brutality of slavery made these policies risky to carry, and they were not profitable enough for the insurance company to continue to offer.

In 1875, a few insurance companies offered “industrial life insurance” to both white and black workers. These policies were meant to cover the cost of a funeral and provide some income protection for a spouse and family. 

In 1881, one insurance company conducted an internal survey that found black mortality rates were about 50% higher than white mortality rates (more than likely a result of slavery and Jim Crow). Using the survey results as justification, the insurance companies raised the premiums for black families accordingly and offered lower death benefits on black workers.  Limits were placed on how many black families each agent could help insure, and some policies held by black families were even terminated as a result of the study.

Another deterrent that was used by insurance companies in the 1800’s was the non-payment of commission to any agent who sold a policy to a black person.  Alternatively, some insurance companies would pay lower commissions for selling a “standard” life insurance policy to a black person but would pay full commissions for selling them a “substandard” policy.  These substandard policies had higher premiums or lower death benefit amounts based on highly prejudicial factors and were marketed as burial insurance.  Families usually ended up paying nearly as much, or sometimes more, than the death benefit for these policies.  

In 1884, a Massachusetts investigation led to the first legislation that banned insurers from using race as a factor when determining insurance premiums and the amount of coverage available.  The legislation was opposed by those who cited the 1881 survey and preached of its validity while ignoring that many of the factors that contributed to the documented mortality rates had been abolished.  The legislation passed regardless of opposition, and other states followed suit. 

In 1898, three local leaders in North Carolina established the North Carolina Mutual Life Insurance Company that offered adequate life insurance policies to black families.  This insurance company reinvested in black communities, shared their economic prosperity, helped grow local businesses, and spurred entrepreneurs.  This new insurance company took a big step in a more equal landscape for black families when buying life insurance.

However, the early discrimination in life insurance towards black people still has an effect.  Since the 1800’s, only 17 states have explicitly banned the use of race as a determining factor for premiums and available coverage.  Black Americans are currently more likely than their white counterparts to implement life insurance, but white families have significantly larger policies than their black counterparts, even when income levels are the same.  A LIMRA study in 2021 found that 30% of black Americans think life insurance is just for burial expenses. 

More work needs to be done to include black families in discussions about available life insurance products and funding options.  While we are not aware of any insurance companies that use race to determine the premium or death benefit available for a policy, and we would not knowingly work with anyone who does so, we are sensitive to the history of life insurance discrimination in this country.  We take every opportunity to move forward with indiscriminate education and guidance for everyone we meet.