Jessie Wright-Mendoza at JStor: “After the Civil War, the United States searched for ways to redefine itself. But by the 1880’s, the hopes of Reconstruction had dimmed. Across the United States there was instead a push to formalize and legalize discrimination against African-Americans. The effort to marginalize the first generation of free black Americans infiltrated nearly every aspect of daily life, including the cost of insurance.
Initially, African-Americans could purchase life insurance policies on equal footing with whites. That all changed in 1881. In March of that year Prudential, one of the country’s largest insurers, announced that policies held by black adults would be worth one-third less than the same plans held by whites. Their weekly premiums would remain the same. Benefits for black children didn’t change, but weekly premiums for their policies would rise by five cents.
Prudential defended the decision by pointing out that the black mortality rate was higher than the white mortality rate. Therefore, they explained, claims paid out for black policyholders were a disproportionate amount of all payouts. Most of the major life insurance companies followed suit, making it nearly impossible for African-Americans to gain coverage. Across the industry, companies blocked agents from soliciting African-American customers and denied commission for any policies issued to blacks.
The public largely accepted the statistical explanation for unequal coverage. The insurer’s job was to calculate risk. Race was merely another variable like occupation or geographic location. As one trade publication put it in 1891: “Life insurance companies are not negro-maniacs, they are business institutions…there is no sentiment and there are no politics in it.”
Companies considered race-based risk the same for all African-Americans, whether they were strong or sickly, educated or uneducated, from the country or the city. The “science” behind the risk formula is credited to Prudential statistician Frederick L. Hoffman, whose efforts to prove the genetic inferiority of the black race were used to justify the company’s discriminatory policies….(More)”.