middle-income market who earn about $50,000 annually. These items include 10- and 20-year term policies, an annual renewable term policy, a new annuity and an interest-sensitive whole life policy. With term policies, a customer insures his or her life for a set time and pays an annual premium based on age. The older you get, the more the policy costs. Annuities are fixed-rate investment vehicles that can provide income during retirement. The difference, says Cornelius, is that unlike its lower-priced home service products, Atlanta Life’s new middle-market policies have a minimum face value of $50,000.
These factors led A.M. Best to give Atlanta Life a “B” or “fair,” and a positive rating. Now, the challenge will be to see if it can carve a middle-income niche, raise premiums and cut costs simultaneously.
Larkin Teasley knows change is risky. Since 1991, the CEO of Golden State Mutual Life Insurance Co. (No. 3 on the 1998 BE INSURANCE COMPANIES list with assets of $102.7 million) has whittled its home service market while focusing on selling insurance to black and Hispanic middle-income households earning $20,000-$50,000 annually.
Golden State’s results have been mixed. On the downside, in 1997, A.M. Best gave it its sixth consecutive “C++” or “marginal” rating. Also, the firm had the unfortunate distinction of suffering its seventh straight year of declining net investment income–going from $9.7 million in 1991 to $8.1 million. Since 1995, Golden State’s premium income has been stalled at about the $15.4 million level.
Teasley is expecting these numbers to change significantly due to Golden State’s move into the Washington, D.C., and Maryland markets. Last year, the D.C. office, which specializes in sales to government employees, had the firm’s highest sales in premiums. This was a coup since the office opened just last March.
Teasley is buoyant. He contends that since 1990 the company’s middle-income base has grown from 20% to 60% of its business. He believes the higher wage earners he is attracting in D.C. represent the continuation of some promising trends for his firm. “We think if an employer endorses Golden State and permits the employee to pay by payroll deduction, it means there is a much better chance of the policy staying in force,” he says. “Plus, the salesperson doesn’t have to try to catch the person at home or during nonworking hours.”
The future of Golden State’s Hispanic sales initiative is less clear. “Latinos represent an opportunity,” Teasley says. “They are at the lower end of the economic spectrum just like African Americans, and the large [insurance] companies have been slow to penetrate the market because of attitudes about ethnic people and Spanish.”
Golden State is taking steps to reach Latino consumers. All its phone messages are in English and Spanish. Teasley also says the verbal prompts customers use to select information about products is bilingual, and he plans to hire bilingual sales agents. Unfortunately, he adds, Hispanic policy sales are still very low, and some Golden State employees have resisted entering that market.
By contrast, there is no resistance