The U.S. life insurance market has not capitalized on the true purchasing power of African-Americans, but it's on the cusp of tapping a lucrative market segment. As the nation observes Black History Month in February and celebrates the legacies of Dr. Martin Luther King Jr. and other pioneers, I'd like to explore the concept of creating an even greater endowment, one that will benefit generations of African-Americans.
The most compelling evidence backing this initial assertion are three 2010 LIMRA reports detailing African-Americans' improving attitudes about life insurance. The data conclude that, compared with the general population, a larger proportion of African-Americans consider life insurance to be more important today than in the past. Also, one-third of the African-Americans polled said they are very likely to buy life insurance for themselves or someone in their household, as compared to 15% of the general market. These findings, coupled with the fact that wasteful spending habits have been curtailed by the recession, suggest that a perfect storm may be brewing.
It is an opportune time to examine opportunities, challenges and actionable ideas to strengthen market share among African-Americans.
The economic recession has forced many Americans to rethink their financial decisions. This holds true for African-Americans, whose collective buying power, according to the Selig Center, rose to $957 billion in 2010. Yet, TargetMarketNews.com reports that African-Americans invested a mere $4 billion in life, endowment, annuity and other personal insurance last year. This ratio is considerably smaller than that of the general market.
In 2011, a new, sobered financial climate will provide a landscape that is ripe for a major shift in thinking about money and spending, particularly among African-Americans. Insurance professionals have an opportunity to educate African-Americans and assist them in growing their increased incomes into multigenerational wealth. Conversations about human capital -- defined as the present value of future earnings -- as well as discussions about how the unexpected death of a breadwinner would impact his or her dependents should be at the core of every agent's relationship with clients. Similarly, advisors must have thoughtful discussions about the enhanced need for long-term care insurance, especially given greater life expectancies, and the importance of transitioning from a lifestyle of spending to one of love, legacy and leadership.
What many agents find after a thorough fact-finding is that families and businesses have not properly planned to protect income, fund college or transfer wealth to survivors. There's arguably no better product than life insurance to assist with proper planning. And new strategies developed by New York Life Insurance Company and Ibbotson Associates Inc. illustrate how making investment and insurance decisions, together, will optimize clients' portfolios.
In 2011, the New York Life African-American market unit will rally around a movement to encourage African-Americans to take charge of their financial foundation and begin building multigenerational wealth. The company is committed to leading a community-based, group-driven initiative that uses life insurance as the tool to eventually inject billions of dollars into communities around the country. Our agents are challenging thought-leaders to engage families, businesses, churches and schools about a collective investment in the future.
This initiative is derived from an appreciation of the past 50 years, since Dr. King's "I Have a Dream" speech. Many have worked tirelessly to help fulfill that dream. In 2011, the "children of the dream" must strive for the next level of true equality -- financial freedom. Changing mindsets is the aim, life insurance is the means, and estates are the destination and common denominator.
Hurdles to selling life insurance include beliefs such as "The Lord will provide for my family," or "I just need enough insurance to bury me." Addressing these challenges is crucial to success. Handling these objections early in the relationship is a good idea. Most can easily be settled with illustrations and candid conversations.
Lastly, there is a need to rethink spending habits. The economic crisis that began in 2008 may have prompted families to re-examine spending, but it is critical to underscore the importance of putting family protection and wealth creation ahead of purchasing the latest must-have electronic gadget. It may take more than one meeting to convey this message, but this is what agents do best.
By focusing on prudent financial planning and meaningful conversations about the wealth-generating ability of insurance, agents will tap into African-Americans' need and reported desire for life insurance.
It's expected that family estates will be created. Second- and third-generation businesses will prosper. And there will be greater support for historic organizations.
Eugene Mitchell is the corporate vice president and African-American market manager at New York Life Insurance Company.