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African-American consumers could prove to be the U.S. life insurance industrys stealth growth market.

The average African-American earns less and has less wealth than the national average, but the averages are misleading.

Although some African-American households continue to struggle, the 1.7 million African-American households that earned more than $75,000 in 2000 combined for a total of $198 billion annual income, according to the Census Bureau. Affluent African-Americans combined income is about the same as the national income of Switzerland.

The 43,000 African-American households in the Census Bureaus top income category, for households with annual incomes over $250,000, brought in an average of $556,965 per year. That compares with an average of just $465,786 for whites in the same category.

Furthermore, African-Americans with annual household incomes over $50,000 have much warmer feelings toward life insurance and related products than the general population, according to a 2001 survey commissioned by Ariel Capital Management Inc., Chicago, and Charles Schwab & Company Inc., San Francisco.

Seventy-one percent of the African-Americans interviewed owned life insurance, compared with 62% of the whites.

Thirty-four percent of the African-Americans owned fixed or variable annuities, compared with 26% of the whites.

Twenty-two percent of the African-Americans said they have the most assets at life insurance companies, compared with 10% of the whites.

Kareim Cade, a partner at M.L. Garland Hill Agency, Detroit, an insurance agency that runs worksite marketing programs, has no complaints about his target market, which consists largely of African-American government workers.

“Its definitely easy to drum up business,” Cade says. “Theres plenty of money there.”

Even today, “those markets are out there, and they are underserved,” says Mitzi Jackson, marketing coordinator for African-American market development at AFLAC Inc., Columbus, Ga.

But Jackson and other life insurance company executives get even more excited when they talk about Census Bureau projections for the future.

The “middle” projections predict that African-Americans will make up 15% of the U.S. population by 2050, up from 13% today, and that non-Hispanic whites will make up only 53% of the population, down from 71%.

AFLAC set up its 10-year-old multicultural development unit mainly because of demographic projections, Jackson says.

Life insurers were not always as eager to sell to African-Americans.

Years ago, insurers shied away from African-American applicants because of a combination of racism, high general African-American mortality rates, and fear of the malaria, yellow fever and other diseases and conditions that increased mortality rates for both the white and African-American residents who lived in the South.

Northern state legislatures began trying to outlaw race-based life insurance pricing as early as the 1880s. Life insurers responded by pointing to the mortality tables.

In 1900, the Census Bureau reported that the average white male had a life expectancy of 46.6 years at birth, while the average African-American male had a life expectancy of only 32.5.

For decades, African-Americans struggled to fill in the gaps by starting insurers such as Atlanta Life Insurance Company, Atlanta, and North Carolina Mutual Life Insurance Company, Durham, N.C., that would sell them enough life insurance to cover the cost of funerals.

The companies sold “industrial life policies,” which were designed so that agents could collect the premiums directly from the policyholders on a weekly basis.

The mortality gap has narrowed considerably over the years.

The U.S. Department of Health and Human Services reported in “Health, United States, 1998″ that 45-year-old African-American men in households with annual incomes over $25,000 per year have an average life expectancy of 32.6 additional years, compared with an average life expectancy of 33.9 additional years for white 45-year-old men in the same income group.

At age 65, both white men and African-American men in the over-$25,000 category can expect to live to age 82.

Besides, says Jerald Tillman, owner of J.L. Tillman Insurance Agency, Sharonville, Ohio, the days are long gone when life insurers could get away with making race an official part of the underwriting process.

“For the most part,” Tillman says, “the underwriters dont know whether the applicant is black or white.”

Today, U.S. life insurers are happy to sell life insurance to all types of customers.

Affluent African-Americans interviewed say they believe they are getting their fair share of letters and calls from financial services advisors.

But, for outsiders, measuring just how well the African-American life market is doing is difficult, because many life insurers and life market research organizations avoid collecting data about the race of customers and survey participants.

At AFLAC, “we dont really think thats necessary,” Jackson says.

Some life insurers worry that collecting information about consumers race might be perceived as racist.

Other life insurers group African-Americans together with the general population, rather than setting up special marketing operations, for the obvious reason that African-Americans speak English, according to a life marketing expert who requested anonymity.

For the insurers themselves, the relative lack of detailed market research data on African-American financial services consumers is not much of a handicap, says Tariq Khan, an assistant vice president who works in the multicultural marketing unit at MetLife Inc., New York.

“I have never in my life felt that we had all the information we needed about a particular community,” Khan says. But he adds that “the local offices are in the best position to serve their communities.”

In effect, Khan says, the best way to get the relevant information is to hire sales representatives who know their markets.

Even marketers who do approve of the idea of analyzing the “African-American market” hasten to point out that the term is imprecise.

“Theres no monolith,” says Virgil Scott, president of Anderson Communications Inc., Atlanta, the second oldest African-American-owned marketing firm in the United States. “Theres no single African-American market.”

Rich African-Americans are different from poor African-Americans, and rich African-Americans who live in New York and ride subways are different from rich African-Americans who live in Atlanta and drive cars, Scott says.

But Scott argues that surveying African-Americans and organizing focus groups made up of African-Americans can help life insurers communicate better with prospective African-American customers.

“Its about more than putting black faces in white ads,” Scott insists.

Marketing tools are available for insurers that look hard enough.

Target Marketing News Inc., Chicago, has been publishing data on African-American buying habits for years.

The Ariel/Schwab surveys have started to shed light on African-American attitudes about investing.

Geoscape International Inc., Miami, has developed a “Socioeconomic Status” measure that helps it identify the most affluent households in any given demographic group, including the African-American group, in communities throughout the United States.

Geoscape reports that 1.1 million of the countrys 35 million African-Americans fit in its top “SES A” category, which includes households where graduate degrees are common and incomes are more than about $100,000 per year.

New York, for example, has 113,708 SES A African-American residents, but SES A residents make up only 3.2% of its African-American population.

Chicago has only 89,392 SES A African-American residents, but 5.2% of its African-American population fits in the SES A category.

AFLAC and MetLife are two life insurers that go beyond theoretical market research and make special efforts to reach African-Americans.

AFLACs multicultural development department has a team that helps recruit African-American and Hispanic agents and also helps market to African-American and Hispanic businesses and associations.

The department maintains ties with organizations such as the National Black Chamber of Commerce, Washington, and the National Conference of Black Mayors, East Point, Ga., just as other AFLAC units work to maintain ties with many other organizations that influence the purchasing of insurance.

“It makes good business sense, and its becoming a business necessity,” Jackson says.

MetLife also includes its African-American marketing effort in a broad multicultural marketing program. The same unit also has divisions that reach out to groups such as Chinese Americans, Korean Americans, Hispanic Americans and Russian Americans.

About one-third of all U.S. MetLife financial services representatives are part of the multicultural marketing program, Khan says.

Experts interviewed recommended that insurers and agents who want to increase sales to affluent African-Americans start by using the same tactics they would use to reach rich Harvard alumni: by going to meetings of their organizations, advertising in the publications that they read and making an effort to understand their culture.

“The strategies are always the same,” Scott says. “Its the tactics that become different.”

One difference in the African-American market is a hunger for trustworthy financial information, experts interviewed say.

Cade points out that many African-Americans are still learning about investment basics and are still unfamiliar with the idea of using life insurance for anything other than paying death benefits.

“There has just been a lack of education about the need for life insurance,” Cade says.

Tillman grew up in Springfield, Ohio, thinking that “life insurance” meant industrial life insurance.

“Your mother or father told you, Hide! Here comes the insurance man,” Tillman recalls.

Another market difference is the typical African-Americans lack of inherited wealth.

Scott remembers living in Maryland and earning more than a white couple next door. Scott had weaker finances, in spite of his higher income, because the families of the white neighbors had given them the cash for their down payment. Scott had to raise the cash for his down payment on his own.

Meanwhile, high-income African-Americans are so intent on giving their children the best possible start that they often starve their retirement accounts to beef up college savings funds, according to the 2000 Ariel/Schwab survey.

Although the affluent African-Americans interviewed earned an average of 10% less than the whites interviewed, they had saved an average of $12,289 for their childrens education, compared with an average of $12,239 for the white participants.

But African-Americans with retirement accounts had an average of only $44,000 in account assets, compared with an average of $69,000 for whites.

A growing number of African-American business groups and publications are trying to persuade African-Americans to think more about retirement savings and estate planning.

The most visible, Black Enterprise magazine, has published the Declaration of Financial Empowerment.

The DOFE manifesto asks readers to pledge to “measure my personal wealth by my net worth, not income” and to “ensure that my wealth is passed on to future generations.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 10, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.