Building The Roads To Retirement

Understanding — And Closing — The Life Insurance Gap


An inward look at the Hispanic American demographic

by Alison Salka, Ph.D.

Ms. Salka is senior vice president and director of research for LIMRA and LOMA. She joined the organization in 2012 and is responsible for determining the strategy and direction of its global research program.
Salka oversees a team of more than 80 researchers and other professionals who conduct consumer research, run benchmark studies, and write whitepapers focused on helping member companies better understand industry issues and trends. Connect with her at asalka@limra.com.  
Editor’s note: This is the first in a series of articles that will examine the diverse demographic landscape that advisors must embrace and understand in order to develop meaningful planning solutions.

The COVID pandemic forced all of us to face our vulnerability and mortality. For many, things that seemed necessary pre-pandemic (such as working long hours, embracing the “hustle culture,” or living a luxurious lifestyle) suddenly lost their appeal. Conversely, priorities such as the health, well-being, and protection of family and friends became even more important.

The insurance and financial services industry’s mission plays a critical role in helping people address this new set of priorities — especially through providing life insurance coverage, which offers security and peace of mind when families need it most. As the pandemic continues in various forms, many Americans have an increased awareness of and appreciation for the value life coverage provides. However, for the industry to connect people with the protection they need, it is imperative that we understand the unique perspectives of the nation’s diverse market segments. This article focuses on one specific population — Hispanic Americans — that represents an opportunity to meaningfully close some of the life insurance coverage gap.


Market Characteristics

To begin to understand and serve this market, it is critical to examine what defines it and distinguishes its members. This ethnic group is comprised of any individuals of Cuban, Mexican, Puerto Rican, South American, Central American, or other Spanish culture or origin, regardless of race. According to a U.S. Census report, Mexicans are the largest segment (61%), followed by Puerto Ricans (10%), Central Americans (10%), South Americans (6%) and Cubans (4%).[1]

As of 2020, the total Hispanic-American population numbered 62.1 million. This represents an increase of 23% over the prior decade, although growth appears to be slowing somewhat. Currently, this is a substantially sized market that represents a significant opportunity for the industry.

There are a number of key ways Hispanic Americans are different from the rest of the U.S. population.[2] For instance:

  • They are younger. In 2019, 31% of Hispanic Americans were under age 18 — compared with 19% of non-Hispanic whites.
  • They use their native language. Many Hispanic Americans speak Spanish or are bilingual, as 71% of them spoke a language other than English at home.
  • They often trail others in education level and income. Eighteen percent of Hispanic Americans, versus 37% of non-Hispanic whites, have earned a bachelor’s degree or higher. Among full-time, year-round workers in 2019, the average household income for Hispanics/Latinos was $55,658 — notably lower than the average $71,644 for non-Hispanic white households.
  • They tend to have different jobs. Twenty-four percent of Hispanic Americans, compared to 15% of non-Hispanic whites, work in service occupations. When it comes to managerial or professional occupations, 24% of Hispanic Americans and 45% of non-Hispanic whites hold these roles. This employment dynamic means Hispanic Americans may have less access to life insurance at their workplace.

The Opportunity

When it comes to the potential to connect more people with life insurance, recent research points to a strong opportunity within this market. According to the 2022 Insurance Barometer Study by LIMRA and Life Happens, just 41% of Hispanic Americans currently own life insurance — representing the lowest ownership level among all races and ethnicities.

The findings also show approximately half of Hispanic Americans have a need for life insurance, between underinsured owners who feel they need more coverage (11%) and uninsured non-owners who say they need to obtain any (40%). Among the population of 43.4 million Hispanic American adults, these segments represent 4.8 million individuals and 17.4 million individuals, respectively. Together this forms a population of 22.2 million Hispanic Americans who have what we would define as a “life insurance need gap.”

Life Insurance Coverage and Perceived Gap, by Race and Ethnicity

The situation becomes even more concerning when we examine coverage by generation. Among Hispanic Americans, just 36% of Millennials own life insurance — making it even more vital to clearly explain and convey the importance of life coverage to younger individuals.

Financial Concerns

Looking to their broader financial picture, what keeps Hispanic Americans awake at night? In general, members of this population are more concerned than other races and ethnicities about their finances. When asked about a list of individual issues, Hispanic Americans express more concern than everyone else in every category — with the exception of “losing money on investments” and “paying off student loans.” (This points to the fact that, often, they have not invested as much as others, nor are they sending their children or themselves to college as frequently as others.)

Misconceptions regarding the product’s cost, what type to buy, and how much to buy are more common among Hispanic Americans than other ethnicities...

However, most of their worries tend to be specific to areas such as retirement planning and shorter-term priorities (such as paying routine bills). What may be missing is education around the important role life insurance plays in overall financial security — which can be defined as the ability to pay for the mortgage/rent, childcare, and other non-negotiable monthly expenses, if the primary wage earner were to unexpectedly pass away. Our research shows 67% of those who own life insurance feel financially secure, compared to just 46% of those without coverage.

While life insurance may not be a top priority among the Hispanic American community, efforts to increase the awareness and knowledge of its value would be beneficial. There appears to be a real need among this market for increased protection. For instance, the time to hardship for Hispanic Americans is concerning: 48% say their family would face financial hardship within six months if the main wage earner were to pass away. For 28%, this would occur within only one month.

Rules of Engagement

With this backdrop, it is clear that opportunities for engaging, educating, and communicating with this market persist — especially in the areas of life insurance’s value and affordability. Misconceptions regarding the product’s cost, what type to buy, and how much to buy are more common among Hispanic Americans than other ethnicities.

For instance, 38% say a “major” reason for not purchasing more or any life insurance is that it is too expensive. The same proportion cite “other financial priorities” as a major reason, which raises the question: What can the industry do to move life insurance higher up the priority list?

In addition, Hispanic Americans are slightly more likely than others to say they have life insurance through their employer and believe this coverage is sufficient. However, especially in today’s tumultuous labor market landscape, they may also want to consider securing individual coverage for additional peace of mind. Also, as noted previously, workplace coverage is likely not an option for many in service sector professions.

The Trust Factor

Another key element in connecting with this market is trust. While establishing trusted relationships is certainly crucial across all client segments, it plays an especially important role here. The Hispanic American community clearly cites lower levels of trust in the insurance and financial services industry as a major or minor reason they do not own life insurance.
Like many individuals, Hispanic Americans find it difficult to talk about death, which also may be a barrier to having any meaningful conversation about the need for life coverage. When financial professionals take steps to build a foundation of trust before bringing up this subject, it can make the conversation easier and more comfortable — facilitating the ability to address future-focused plans.

Hispanic Americans also say they value working with financial professionals who share their cultural background. Whenever possible, this alignment would go a long way toward fostering trust. Even initiatives that demonstrate a sincere effort to speak directly to this market can be effective. In one example, for this year’s Life Insurance Awareness Month campaign, Life Happens partnered with actress, dancer, producer, author, wife, and mother Roselyn Sánchez to be the face of its message as a life insurance advocate. The organization produced visually appealing messaging about the importance of life insurance — not only in English, but also in Spanish language versions — to reach this population, which helps them to feel seen and valued.

Going Social

While social media use is certainly pervasive across all U.S. populations, Hispanic Americans use these platforms to gather financial products/services information more than others do. Sixty-six percent of Hispanic Americans say they use social media to access this information — compared to 64% of Black Americans, 61% of Asian Americans, and 47% of white Americans. Among this community, while Facebook and YouTube are most common, they have a higher propensity for “newer” and “quicker” platforms such as Twitter, Instagram and TikTok.

What’s Next?

Moving forward, to harness the opportunity the Hispanic-American market presents, leading-edge organizations and financial professionals will take an intentional and sincere approach to understanding this population’s unique perspectives and behaviors. Those who are able to provide helpful education about life insurance, effectively address pain points and concerns, build trusted relationships, and connect with people where they prefer will be most successful in closing this coverage gap.

 

 

 

[1] https://minorityhealth.hhs.gov/omh/browse.aspx?lvl=3&lvlid=64
[2] Ibid.

 

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