Golden State Mutual succumbs to ‘progress’
From the 1920s through the 1960s and most of the 1970s, people in the African American community would tell stories of the Golden State Mutual Life Insurance company (GSM) coming to the door to collect premiums.
Today, the once venerable Black business is on the brink of extinction, and a former president and chief executive officer says the reason why has been both bane and a blessing to the African American community.
“For a long time (the company) had been losing market share,” explained Ivan J. Houston, former GSM president and CEO who ran the firm from 1970 to 1990, after joining in 1948. “We built our business, when the African American clientele was living almost together in various areas. But over time that began to disappear.”
Additionally Houston—whose father, Norman O. Houston co-founded the company in 1925 with William Nickerson Jr. and George Allen Beavers Jr.—said African Americans who were able to buy insurance from White-owned and -controlled companies were often charged a higher rate.
GSM built its business by tapping into that niche.
But today the advantage that fueled an entire industry that consisted of about 62 other Black-owned firms when Houston joined GSM in 1948, is gone, and the number of Black-owned or founded firms has dwindled to a mere hand full.
The GSM founding trio opened their doors in one-room offices on Central Avenue, which was then the heart beat of the Los Angeles African American community, with a scant $17,800 in capital. Within three months, Golden State Guarantee Fund Insurance Company, as it was then called, had outgrown its headquarters and moved to 3512 Central. It continued to grow: First it was an office in Oakland (1925); then Illinois (1938); and then Texas in 1944. At one point, GSM conducted business in 14 states and had more than $4 billion in policies.
The company had also built a second headquarters at the corner of Adams Boulevard and Western Avenue designed by famed African American architect Paul Williams.
What made the Golden State Mutual agent so unusual was the value-added service they offered, Houston said.
“Our guys did more than just sell insurance. They operated in areas that were not at all modest income, and they would also give people advice and counsel,” explained the former GSM board member.
In fact, they were so trusted, recalled Houston, that people would leave money in their unlocked homes in a designated place, and the agents would go in and collect it and then note the payment in the client’s record book
“For many many years, Blacks couldn’t have a white collar job in business. (GSM gave them that opportunity.) We employed the best people; almost all of our employees, even the clerical workers and secretaries had either a college degree or some college . . . Our agents received great training, and learned how to talk to people and they had to be disciplined.”
In essence, Golden state often served as a training ground for people to get experience in the business world and the move on.
At its height, Houston estimated that the company employed 600 to 700 people around the nation.
But social progress changed the situation. African Americans began to move away from their traditional communities and could buy insurance from anyone without the surcharge. Employment also opened up in the general market.
And although Houston said GSM tried a variety of strategies to keep market share and rebuild its coffers—including trying to tap into the Hispanic market, selling assets including their famed artwork and headquarters building—ultimately their efforts were unsuccessful, and on September 30, 2009, the California Department of Insurance took the company into conservatorship.
The action came after numerous years of assistance from the department, according to a spokesperson, but GSM continued to run significant deficit, and this was creating a financial situation that put servicing policies in jeopardy, said the department.
Today, the historic insurance company is no longer selling policies and the department is conducting due diligence on companies that have submitted bids to purchase the company. Officials expect to go into court by the end of February to make their recommendations and hope to have approval to finalize a sell by the end of the first quarter of 2010.