Life insurance gap persists for Black Americans
While the more than half (56%) of Black Americans own life insurance, this number still represents a 19-point gap from the 75% of Black Americans who believe they need life insurance, according to the Insurance Barometer Study conducted by LIMRA and Life Happens.
In a recent interview, MDRT member Brenton Harrison shared some critical insights agents should keep top-of-mind as they pursue the African- American market.
The Barometer Study, conducted last year, noted that Black Americans were significantly more likely to be concerned about being able to save for an emergency fund, pay their monthly bills and their mortgage, and leaving their families in a difficult situation due to a premature death.
Like most Americans, Black Americans’ misconceptions about life insurance prevent them from getting the coverage they need, the study said. While the top reason Black Americans give for not purchasing coverage is that it’s too expensive, the study found that Black Americans are more likely than the general population to overestimate the cost of life insurance (75% versus 50%). They are also more likely to believe the coverage they get through their employer is adequate.
“...It’s important the advisor is willing to educate until the client understands, and can identify why it’s in their best interests.”
— Brenton Harrison, MDRT member
Although Harrison serves clients of all races, African-American households comprise 80% of his clientele. To work in this community, he said, one must understand two truths:
1.) Few organizations have attempted to authentically serve the African American community.
2.) Among organizations that have tried, there have been painful examples of improper and predatory business practices. “When you factor in that the majority of black households do not have significant financial assets that most firms look for in prospects, it’s no surprise the majority of African-American prospects I encounter have never worked with an advisor. And for those who have, the experience was often a negative one, characterized by their lack of trust in the person giving them advice,” he said.
Establishing trust is crucial, Harrison added, because compared to their white peers, African-Americans often have less exposure to insurance planning, investment opportunities outside their work, or even the importance of establishing a will and powers of attorney.
“If the first person to present these topics is their advisor, it’s important the advisor is willing to educate until the client understands, and can identify why it’s in their best interests,” he said.
The process of educating while establishing trust can lead to some transparent conversations, Harrison said. “I am not surprised when a client asks exactly what I’m making from a product or service I’ve implemented, and why even if there are more cost-effective options available, my recommendation is best for them. Some even want to know if my family and I utilize the same product or service before they agree to move forward.”
Struggle with student loans
Most importantly, high-income-earning African-American households are more likely to struggle with student loans and consumer debt than their peers, Harrison added. It is common for him to meet African-American prospects in the medical or legal field who earn a strong income, but owe over $400,000 in student loan debt (per person).
They are also often financially supporting other family members, such as parents or siblings who have less means. “This is a phenomenon I’ve experienced firsthand, as I grew up with high- income-earning black parents who were often supporting two to three households outside of our own,” he said.
These differences present unique planning opportunities to advisors, Harrison added. And if they are not willing to go above and beyond to treat them as unique, they should reevaluate whether they are committed to authentically serving this community’s needs.
African-American households often do not fit the mold of a prototypical client, he pointed out. But when an advisor accepts and embraces the different methods that address their needs, they will establish goodwill that leads to repeat business, multiple referrals, and a tangible impact greater than what they find working with clients whose wealth was established prior to meeting their advisor.
Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].
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Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].
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