Feeding new prospects into the pipeline is the lifeblood for producers. But where does new growth come from? That is the age-old question agents face. One answer is by cultivating multicultural markets.
According to Census Bureau projections, a demographic shift in the U.S. is well underway, (Figure 1) and by 2050, multicultural consumers will hit majority status. The demographic shift is already in effect in many states, including California and Texas, where a “majority minority,” meaning white non-Hispanics, make up less than 50 percent of the population. With those figures in mind, it’s in the producer’s best interest to grow a multicultural client base.
Who are the multicultural markets, how are agents reaching them and what support are producers receiving from the industry are just some of the key question raised in the 2013 Multicultural Markets Study. [Note: For the purposes of the study, the research considered four distinct multicultural markets: African American, Hispanic, Asian and LGBT.]
This National Underwriter Research, conducted by the National Underwriter research team, reveals an insurance population out of balance with the general population, and an agent force unsure of how to reach multicultural prospects.
But the news is not all doom and gloom. Respondents say they have noticed a significant uptick in the industry’s efforts to reach diverse markets in the past 10 years. While statistics have yet to show a deeper penetration into these markets, it lays an initial foundation that will require a more concentrated effort by individual agents, as well as the industry, to better understand multicultural markets through education and to reach them through client-specific marketing material.
With those tools in hand, the more important aspect will be to make those initial sales to diverse clients. As agents understand, sales beget sales. By entering new markets and gaining new, diverse clients through trust and the building of relationships, producers set themselves up for long-term growth and a new prospect stream.
The question of population
A common theme regarding the insurance industry is that it is one dominated by white males, specifically white males in executive positions or as producers. But are agents disproportionately white relative to the population at large?
When asked about their racial and ethnic background, approximately 14 percent chose not to answer the question at all. But of those respondents who did provide an answer, 85 percent self-identified as white, 6 percent as African American, 6 percent as Hispanic, 3 percent as Asian and 1 percent as LGBT. So, how do these numbers compare to the general population?
The 2012 U.S. Census Bureau Data reveals that the numbers diverge quite significantly. As shown in Figure 1, the data reveals some major differences in the insurance industry population and the general population.
Consider that whites account for only 63 percent of the general population, 21 percent lower than their corresponding agent population. In the case of the multicultural groups in the study, all were significantly higher in the general population with African Americans (13 percent, an 8 percent swing), Asians (5 percent, a 2 percent difference), Hispanics (17 percent, the biggest difference in the multicultural groups at 11 percent) and LGBT (3 percent, a 3 percent change).
Given the disparity in the numbers, could this explain why multicultural markets are underserved? Or do the ethnic background of advisors and prospects really matter?
According to the survey, respondents put much more importance on income/asset level (35 percent), age/generation (40 percent) and profession/industry (28 percent) than they do race/ethnicity (4 percent) when targeting prospects. Furthermore, agents also place familial status, whether a client is single, married or divorced (16 percent) much higher than ethnicity. Religion (3 percent) and sexual orientation (2 percent) were the only options that respondents put less importance on than race/ethnicity.
With multicultural markets growing in the U.S., the study asked agents what they see as their growth potential for these potential clients. As shown in Figure 2, more than a quarter, or 26 percent of respondents, saw large to very large growth potential in these markets. Another 51 percent expected modest growth potential, while 23 percent saw no growth potential in multicultural clients. These numbers show that a vast majority of respondents are optimistic about extending their practices into these underserved markets.
To take advantage of the growth potential, some advisors are already marketing to multicultural groups and many wish to grow this market segment in the future. It should be noted that a significantly small number of respondents (5 percent) “consciously market to clients of specific ethnic or cultural backgrounds.” What’s encouraging is that 63 percent of respondents have multicultural clients and would like to grow that book of business. Another 14 percent said they do not have multicultural clients, but are interested in entering this market. Meanwhile, 17 percent of agents in this study said they have multicultural clients and do not plan to grow this segment or do not have the clients and do not plan to work with them in the future.
With 77 percent of the respondents saying they want to extend their business with multicultural groups, where is the potential for the most significant growth and how can agents position themselves to capture it? The study takes a closer look at the African American and Hispanic markets to define who makes up these groups, what are their insurance needs and what are the challenges facing agents in marketing and selling to these diverse markets? [Note: The study did not provide statistically relevant data for the Asian and LGBT markets to warrant additional breakout data.]
Methodology: In June-July 2013, the National Underwriter research team randomly surveyed life/health licensed producers nationwide. These National Underwriter research results reflect answers from personal producing agents who have sold at least one insurance product in the past 12 months. More than 1,600 producers completed the survey.