The way in which the insurance industry puts labels on something as simple as protecting individual’s personal possessions is a bit of a puzzle. Most buyers of high value personal insurance would not be familiar with the phrase “high net worth market” or being called a “private client”. The latter could even be a bit off putting for many!
Insurers need to be a bit more creative with their marketing. You will commonly see insurers using phrases such as “understanding needs” (this isn’t easy by the way and assumes that people know what they need), “bespoke solutions” and “more than monetary values”.
This is fair enough we suppose but easier said than done. In practice, choosing the right customers and being able to assess risk and price fairly are basics that a number of insurers have failed to comprehend and this has led to some pretty high profile market withdrawals. We wrote about this earlier this year in March, before the Covid pandemic took hold.
What’s Included in a HNW Insurance Policy?
It’s tricky. There are a lot of things wealthy individuals need to protect – houses, prestige cars/motor cycles, foreign holiday homes, and collections of art, jewellery, antiques and, increasingly, swimming pools. Traditional stuff, but risks that often seem straightforward to underwriters on the surface are actually more complex once you look more closely. Non-standard constructions, listed buildings, and older homes with potentially old electrics and plumbing are just a few examples. Water damage has a significant impact on insurer profits as do the consequences of fire from poor electrics.
Who Buys a HNW Insurance Policy?
It’s a very competitive market and there are an increasing number of new entrants who think they can profile very distinct buyer profiles. Insurers have ethical considerations – profiling individuals and looking at origins of wealth are at the fore right now.
“Expect insurers to look a lot harder at who wants to buy insurance before they consider the what and the where”
This is worthy of consideration and understanding. The market is no longer dominated by older people in generational family homes with a collection of antiques, paintings and jewellery.
Anthony Jones Insurance Brokers are just as likely to deal with a young person with a high value collection of trainers and apparel – we saw this recently with a professional football freestyler.
It’s amazing what people collect and what is valuable to them – here are a few examples we have come across:
- Pop/Movie Art and Memorabilia
- Comics and Postcards
- Books and Toys
Collections can be protected on an agreed value basis, market value, restoration/theft recover only or on a first loss basis. We wrote about stamps last November and investing in watches last October.
HNW Cyber Insurance
A number of insurers are now adding personal cyber protection to policy cover. We recognise that cyber criminals and fraudsters are increasingly targeting wealthy individuals with sophisticated ransomware and cyber fraud attacks.
Not only that but social media and the internet more generally means criminals can very easily find out where wealthy people live, when they’re there and when they’re not there. A simple Google search will reveal incidences when famous footballers and actors have been burgled when they are known not to be at home. Add to that the risk of aggravated robbery where individuals are attacked in the street because it is known that they will be wearing expensive watches and jewellery.
What’s the Potential Impact of Covid-19 on HNW Insurance?
We should reference Covid-19. It’s a little early to say what impact working from home and the overall increase in time spent at home has had on claims. We have seen fewer water damage claims. There also appears to have been fewer incidences of burglary and theft.
On the other hand, many high net worth products have travel insurance as an optional cover and rather obviously cancellation costs are mounting.
The market generally is reporting a slight increase in home fires. This is mainly due to barbecues and fires becoming out of control, as well as discarded cigarettes.
Working from home is not an issue for insurers. Many also extended the periods they provide full cover for an unoccupied property for those people who found themselves stranded abroad.
At the time of writing, we are not aware of insurers being prepared to pick up the costs of cleaning a property should it become contaminated by Covid-19.