Life-Sustaining Measures

Black insurance companies search for strategies to halt the erosion of their ranks

This october, prominent african american entrepreneurs, CEOs of some of the nation’s largest black-owned firms and high-ranking execs from corporate America will flock to Durham, North Carolina. The reason: to celebrate North Carolina Mutual Life Insurance Co.’s 100th anniversary. In 1898, Dr. Aaron M. Moore, Durham’s first black physician, and John Merrick, a former slave, founded the company. By 1939, Charles C. Spaulding, the third member of the original management team, had built the firm into America’s largest black-owned company.

But amidst the festivities for North Carolina Mutual (No. 1 on the 1998 BE INSURANCE COMPANIES list with assets of $215 million), those who know the history of the nation’s black insurance companies will also feel sadness. In 1975, the BE LIFE INSURANCE COMPANIES list had 39 firms. Now there are just 10. Plus, the National Insurance Association (NIA), the nonprofit organization in Las Vegas representing African American-owned life insurance companies, has only 13 members total.

The NIA’s diminution raises questions. What are the most prescient and forward-thinking CEOs on the BE INSURANCE COMPANIES list doing to ensure not only their survival, but also continued growth? What caused the NIA membership to plummet, and how many black-owned insurance companies are likely to exist in 2000, or 10 years from now?

All NIA members began as home service companies writing insurance policies to cover burial expenses. Their agents sold the policies in people’s homes and returned there to collect premiums. Many NIA firms belong to the Life Insurers Council (LIC) in Atlanta, which represents 80 firms that use the home service distribution system. The LIC says home service companies garner 14% of all U.S. premium income and sell 29% of all U.S. life insurance policies annually. These firms seek to serve the 72% of Americans making less than $50,000 annually. A small fraction of LIC members are still either entirely or partially dependent on the sale of policies for “final expenses.” In 1995, these companies collected almost $6 billion in premiums and had life insurance in force worth $287 billion.

It’s those numbers that have attracted attention and competition. On the selling side, mainstream insurance firms want entry into the $35-$40 billion multicultural insurance market. So, they open offices in black areas, host insurance festivals and advertise in BLACK ENTERPRISE. Many large firms also benefit from working with consortiums of black independent insurance agents. These urban small business owners are banding together to get better deals on policies from white-owned insurance companies.

All this attention pleases educated, middle-income African American consumers. They want more than standard whole life and term life insurance policies. Increasingly, they desire investment products that provide a return, such as annuities, which can be fixed or variable, guaranteed interest contracts and 401(k), 403(b), Keogh plans and IRAs. And the big firms are lining up to sell them these items along with policies.

The NIA knows this, and its membership is fighting back in different ways. In recent years, the three largest black-owned firms–the only ones that have assets over $100 million–have cut

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