The Challenges of Insuring the High Net Worth Individual
We are living in a world where service and value expectations are quickly rising. When speaking with friends and colleagues, it is clear that most of us feel more empowered and entitled than ever before. We all want, and even expect, to be treated like millionaires. We can think about how insurers should deal with this trend by analyzing how they currently treat high net worth individuals (HNWIs).
The rubber meets the road when a claim is lodged. I was at a conference a year or two ago when one of the speakers gave a good summary of the skills required to meet the expectations of a HNWI when a household claim occurs. In addition to being an insurance wizard familiar with the law, our claims expert must be knowledgeable in the fields of real estate, architecture, the latest computers and technologies, vintage automobiles, fine art, fashion and rare jewels, to name just a few areas.
Even that’s not enough. The wealthy are used to the best customer service, so the insurance expert must be part diplomat, PR person and even personal assistant! This skillset is scarce and yet more and more consumers wish to be treated like HNWIs by their insurance carriers.
Taking a quick look at a high net worth household product will shed some light on the challenges facing insurance providers. The obvious first point is that we are talking about much more than just the building and contents. Typically, assistance and travel (winter sports, of course), vehicle breakdown (and recovery), legal protection and tax investigation are all included. This type of wide coverage quickly gets complex.
Despite that complexity, the restrictive clauses and exclusions that are part and parcel of conventional household policies (“is not registered as a business address,” for instance) are usually absent from HNWI agreements. Increasing the challenge for carriers, the policies are drafted in partnership with brokers to meet specific requirements at a fair price, without the duplication in coverage that is inevitable when multiple mass manufactured products are purchased.
Let’s take a deeper look. Coverage for buildings automatically includes accidental damage, as well as the costs of tracing and repairing water leaks (including swimming pools), garden restoration costs and coverage for alternative accommodation for the policyholder, their family and staff – including their pets and horses!
Contents coverage applies to all risks worldwide, including sports equipment, gadgets, gifts, home office contents and children’s personal effects at boarding school and university. Cash, jewellery, fine art, sculptures and outbuildings are naturally covered. The low single article limit with item specification is also typically absent. Liability coverage is also extended to included domestic employees and family legal protection is provided with high limits.
All of this rightfully sounds scary and intimidating for insurance carriers, but it also shows the depth and breadth of the opportunity available to the insurer that can find a way to deliver this coverage at a price that the consumer will pay year after year, and then critically deliver on the promise should a claim occur. Unfortunately, many insurers are currently handicapped by policy systems with rigid product definitions that make this a challenge.
With more and more customers expecting to be treated like HNWIs, what can be done to address the widening gap between expectation and reality? Please stay tuned for my next blog, which will explain how proper claims handling is a crucial part of the proposition…
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