Women In Insurance – A History – Black Owned Insurance Companies in the 1970s

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While writing the general post on the 1970s, I found I had a sizable amount of information on black-owned businesses that just did not fit in easily. It seemed important enough to warrant its own post. Of course, this means it also mimics one of the problems with black-owned insurance companies at that time – they were, in many ways, kept separate in the national economy.

Black-owned life insurance companies were formed as far back as 1899, largely developing out of the secret societies and fraternal organizations created to support the black community. Most of these organizations existed to support families in their communities in paying for funerals at the time of death.

In 1970, there were 42 black-owned life insurance companies. This was a significant reduction from the 60 companies in existence twenty years prior. By 1979, this number had decreased to 38. Most of the loss in number was due to mergers between the smaller companies. Of the rest, some companies were purchased by larger white-owned companies looking to capture some of the negro market, and other companies simply failed.

The National Insurance Association (NIA), a trade organization for the black-owned life insurance companies across the US, was formed in 1921. In 1970, only two of the member companies ranked in the top 400 life insurance companies; the largest was ranked at 299. In 1974, all member firms had nearly $3 billion of insurance in force, and held $451 million in assets.

In 1971 black families held less insurance on average than white families. This was largely due to the heavy concentration of blacks in the lower income brackets. A study completed in 1971 (Starr Roxanne Hiltz) found that even within income brackets, black families still held less insurance. In 1970, the average policy in force for black families had a face value of $2,126, up from $593 in 1960. This compares to $3,461 average policy face amount across the entire industry, up from $2,000 in 1960.

The findings from this study indicate that there were three main reasons for this. First, blacks tended to own more expensive insurance, so it was difficult to afford as much. Much of the insurance written on black lives at this time was debit (also called industrial) insurance, where premiums were collected by agents going door-to-door on a weekly or monthly basis. Because of the extra work required by the agents, the companies charged higher premiums.

In addition, mortality rates were higher for blacks at that time, driving up the price. Ivan J. Houston, chairman of the board of Golden State Mutual Life Insurance Co. explained in one interview that the higher mortality rate was attributed to “a higher rate of homicide, accidents, and a lack of adequate health care” (Black Enterprise, June 1979).

Second, manual laborers of both races tended to hold less insurance than white collar workers, and with a heavy concentration of blacks in that segment of industry, their life insurance dollars were suppressed. Finally, women tended to be the heads of household in black families, and women in general held less insurance at that time.

Prior to this decade, white companies did not actively pursue the negro market. In some instances, these companies actively avoided this business, and some even declined this business. That began to change in the 1970s as the general market growth slowed considerably and white companies looked for new areas of expansion. Suddenly, black-owned companies found themselves in direct competition with the white companies for sales they could have counted on in the past.

Sales from black-owned life insurance companies comprised only one-half of one percent of all life insurance companies in 1970. Suggestions were made by scholars and journalists on how to help black companies grow and continue to be alive and healthy. One suggestion put forth was for black companies to aggressively enter the white market, something many of the companies had tried on a limited basis beginning in the 1960s. One author felt this would be an extraordinarily difficult task, stating:

At our present stage of race relations, such a relationship, with the black in the advisor role, will be achieved neither widely nor easily.

On the other hand, it could be that being black in the white market actually worked as a benefit where the white customer “acting out of social consciousness may prefer black agents” (Duker & Hughes, 1973, pg. 223).

Another suggestion was that the black companies could rely on a “buying black” sentiment to continue to grow in their traditional negro market. Because the market had been built to serve the negro market when white companies refused to do so, some companies felt they could build on the pride blacks felt in the industry to keep them with black-owned businesses. The president of United Mutual Life of New York, Nathanial Gibbon was quoted as saying:

We need more clout so we can have greater input on legislative and regulatory matters, and this can only come from increased participation by blacks in black insurance institutions.

One thing almost everyone agreed to – the black companies had to move beyond the debit policies on which they had built their companies. The general feeling was that the black insurance industry had approximately 10 years to develop new products and markets, the idea being that in general the black market tended to trail approximately a decade behind the white market.

The black-owned life insurance companies were also facing direct competition from white-owned companies for personnel. One reason for this was the push for equal opportunity in the white companies. The white companies were using sophisticated means to recruit black talent including regular visits to college campuses and partnerships with several national black organizations. There are also some hints in the press of white companies poaching top talent from the successful black companies. The white companies were often able to offer higher salaries, additional training programs, and greater promotional opportunities.

aetna ad 1970

In a particularly interesting article, four men who had been recruited to sell for white insurance companies discussed their experiences. One young successful man, with just two years of experience under his belt shared:

I was the first black man hired by my company in the city, and I feel like everyone was watching me. I knew that if I was a failure they would look at every black as being a failure and say that black people just were not interested in supporting black insurance men.

Black Executive, March 1974

Another man, a sales manager with a significant number of years in the industry shared his belief that it was his responsibility to be successful so that others could see it was possible. He said:

I think success breeds success and that success of the early million dollar producers made everyone realize that there was a black market out there, that it did have money, and it was willing to buy insurance to meet his needs. It’s required an education, but now I think we’ve got across the idea that black people have the same types of aspirations, the same types of abilities as white people have. And I mean that to cover the buying of the insurance as well as the selling of it.

Black Executive, March 1974

The top black-owned insurance companies during the decade were North Carolina Mutual, Supreme Life Insurance Co. of America, and Golden State Mutual Life Insurance Company.

North Carolina Mutual opened for business in 1899 in Durham, North Carolina, in order to provide black families with life insurance the white-owned companies refused to issue. By 1974, the company had over $2 billion insurance in force, putting the company at 177 out of 1,810 insurance companies. Over 97% of the policy owners were black.

In order to continue growing, the company made the decision to enter the white market and to aggressively pursue white salesmen. Initial efforts proved this would be a rather difficult endeavor, with most agents leaving the company after only 6 months.

The company also held over $138 million in total assets in 1974, putting the ranking at 150th by this measure. The company employed over 1,300 individuals, nearly all of them black. The company also employed 750 sales agents, many of whom were women.

Over 60% of the business North Carolina Mutual wrote was industrial/debit insurance. The balance was group insurance and ordinary life insurance policies. In the 1970s, the company acquired several other black-owned life insurance companies including Unity Mutual Life from Chicago and Great Lakes Mutual of Detroit.

Golden State Mutual was formed in 1925 as the only black-owned life insurance company on the West coast. The company was almost exclusively focused on debit insurance sales, but decided in 1974 to begin focusing more on middle- and upper- income brackets as black incomes began to climb.

In 1979, Golden State Mutual was the second largest black-owned firm in the West after Motown Records. The company was licensed in 20 states and Washington D.C. The average sized policy the company sold at this time was $2,500 with a monthly premium of $8.35, collected by agents going door-to-door on a monthly basis. Approximately 57% of the company’s insureds were women, reflecting the tendency for women to be the head of household in the black communities.

Golden State had 722 agents, and at the end of the decade had $2.5 billion of insurance in force which included a significant amount of reinsurance and group insurance.

In large part, the black-owned life insurers did not participate heavily in the social movements of the day. The CEO of North Carolina Mutual, William J. Kennedy 3d, was quoted as saying:

Our role is not to become involved in social issues because we feel we can do black people more good in another sense – as an economic symbol. Many of our individual members get involved in social causes. But for the company I think it is necessary that some element in the black community work from the inside as much as possible.

New York Times, 26 May 1974, pg 131

That said, the company did provide loans to black homeowners and business men who could not find money at white-owned institutions.

At the close of the decade, the biggest black-owned insurance companies remained strong. North Carolina Mutual, by far the largest of the group, was well ahead of the others with over $4 billion in force, nearly $170 million of assets, and over 1200 individuals, both black and white employed.

The industry ended the decade healthy and with strong plans for growth in the 1980s. While integration was not fully under consideration, it did appear to be the way of the future. With white-owned insurance companies recruiting black employees and sales representatives, and black-owned insurance companies recruiting white employees and sales representatives, it seems that an integrated insurance landscape was destined to come.

Sources:
Anonymous (1978). “How Insurance Companies Invest Their Money.” Black Enterprise, June, 157-164.

Anonymous (1977). “Insurance Companies: An Overview.” Black Enterprise, June, 121-127.

Anonymous (1975). “North Caroline Mutual: Reaches Two Billion.” Black Enterprise, June, 57.

Anonymous (1979). “Ordinary is Extraordinary for Golden State.” Black Enterprise, June, 197-201.

Anonymous (1974). “Seventy-Six Years of Black Insurance.” Black Enterprise, June, 141-145.

Duker, Jacob M., Hughes, Charles E. (1973). The Black-Owned Life Insurance Company: Issues and Recommendations. Journal of Risk and Insurance, 40(2), 221-230.

Hiltz, Starr Roxanne (1971). Why Black Families Own Less Life Insurance. Journal of Risk and Insurance, 38(2), 225-235.

Parker, Robert A. (1974). “Four Black Salesmen in a White Company.” Black Enterprise, March, 59-61, 71-72.

Puth, Robert C. (1974). Can Black Insurance Companies Survive? Challenge, May-June, 51-59.

Smith, Faye McDonald (1977). “Atlanta Life: 72 Years Old and Still Looking Ahead.” Black Enterprise, June, 133-139.

Stuart, Reginald (1974). “Prudent Insurer Is A Black Business Symbol.” New York Times, 26 May, 131.

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