Numbering 43.9 million, African Americans currently make up 13 percent of the population in the U.S; by 2060, according to the U.S. Census Bureau, that percentage is expected to catapult to 77.4 million, or 18 percent of the U.S. population. It is an increasingly affluent group: In 2011, 3.1 million African Americans were enrolled in college, a 74 percent increase since 2001.
As a target market, this demographic is looking to meet a cohesive set of goals, with one product at the top of their wish list: life insurance. Here’s how you can reach them.
1. Covering funeral expenses is their No. 1 concern.
In National Underwriter’s recent Multicultural Markets study, we asked producers who serve the African-American market to name the concerns and goals their clients brought to them most often. There was a clear winner: Fifty-seven percent said covering funeral expenses was the No. 1 thing their clients came to them to accomplish. This was in sharp contrast to the other groups studied, who were less concerned about this issue. The runner-up? Providing security for their families in the event of death of the primary breadwinner (50 percent).
2. Succession planning is not a concern (though it probably should be).
On that same list of client concerns, succession planning for small business owners was named by a lowly four percent of producers as a concern their clients regularly broach. This, despite the fact that African Americans own 7 percent of U.S businesses, according to the 2007 U.S. Census, making them the third largest group of minority business owners, behind women (29 percent) and Hispanics (8 percent). James R. Veal, president of JRV Financial, notes that the lack of interest in succession planning may because of a low financial literacy, which is prevalent across the general population as well, but can be more pronounced in this market. He says: “Seldom has anyone ever talked to African American prospects or taken them by the hand and taught them basic financial strategies. We have always been aware of financial deficiencies in the African American communities due to the lack of financial professionals, educational opportunities, and neglect.” To help solve this problem, Veal champions education on topics that are relevant for individuals and small business owners alike, including tax planning and building wealth.
3. Life insurance is the product they are most likely to ask about.
In another landslide, eighty-seven percent of survey respondents said life insurance was the product their African American clients were most likely to ask about, reinforcing the concerns and goals this market keeps top of mind. As both a final expense product and a financial planning tool, life insurance is a valuable and in-demand asset for this market.
4. It can be a struggle to communicate the value of financial planning.
When asked about the most challenging aspects of selling to African American clients, thirty-seven percent of respondents noted they found it difficult to demonstrate the value of financial planning. This alludes again to the issue of financial literacy, but it also points to a possible industry concern: Are products becoming too complex? In a subsequent question, producers were asked what insurance companies could do to help them better reach multicultural markets; forty-three percent requested products that were easier to explain.
5. Retirement planning needs aren’t being met.
What other topics did producers cite as frequent client concerns? Being able to afford to retire and maintaining lifestyle in retirement were at the top of the list, coming in at 33 percent and 28 percent respectively. Veal notes that there is huge opportunity to serve an obvious need here: “The most significant concern when meeting with African American clients (including seniors and baby boomers) is that they are inadequately prepared for retirement because of the lack of a savings/investment plan … many are not in good financial shape when I first meet them, but after [we’ve met], savings and investing becomes their primary priority.”