A recent paper, Racial Discrimination in Life Insurance, explores the impact of modern anti-racial discrimination statutes on life insurance coverage differences across racial groups. To do so, the paper's authors, William Gale (Brookings Inst.) et al., exploit data from the 2014 panel of the Survey of Income and Program Participation (SIPP) and then merge it with Avraham, Logue and Schwarcz's (2014) ordinal rankings of "how restrictive a political jurisdiction (each of the 50 states and Washington, DC) is in limiting the use of race as a determinant of life insurance premiums and payouts (as of 2012)." The data sample is restricted to "white and Black adults aged 25-64 in order to focus on the working age population most likely to purchase life insurance. We limit our analysis to data for white and Black individuals in the interest of simplicity and in order to focus on the type of racial discrimination that has been most prevalent historically in the life insurance market."
The paper's core findings include: 1) individuals in states with strong anti-discrimination laws tend to have lower life insurance coverage rates than those living in other states; and 2) Black individuals are somewhat more likely than white individuals to hold life insurance, controlling for observable factors.
While hardly the final word, this paper identifies a fruitful path forward for future research. For example, this paper considers only whether a life insurance policy exits at all, and not the amount (or the face value) of such policies. It remains possible that racial discrimination "could conceivably impact the level [amount] of life insurance even if it does not influence the choice of whether to purchase a policy at all." The paper's abstract follows.
“We examine the historical and statistical relationship between race and life insurance. Life insurance can play a central role in households’ financial security. Race has played an important and changing role in the provision of life insurance in the U.S. from slave insurance before the Civil War, to ‘Scientific Racism’ continuing into the 20th century, to policies that do not explicitly mention race in recent decades. In empirical work using new data, we confirm earlier work showing that Black individuals have higher life insurance coverage rates than white individuals, controlling for observable characteristics. We find no difference in the likelihood of purchasing coverage—for Black individuals versus white individuals—in states with strong versus weak anti-discrimination laws. We also find that the presence of strong antidiscrimination laws tends to reduce overall life insurance coverage – by about 3 percentage points. We present some evidence that this finding is due to a generally stronger regulatory stance in the state rather than the specific impact of the anti-discrimination life insurance law. This analysis bears on the presence of discrimination in the current life insurance industry as well as related issues like the financial status of minority households.”
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