February 15th, 2008
Take cover
It’s not just about making the money, keeping hold of it is also important. We look at the factors wealthier individuals need to consider when making sure they are adequately insured
Britain is becoming a nation of high net worth individuals but plenty of the nation’s wealthiest consumers are failing to ensure that their insurance arrangements are adequate for their evolving needs. One leading insurance company has reported that there has been an increase in personal wealth as a result of business activities and property ownership, citing the increase in house prices over the past decade as a contributing factor.
Furthermore, half-a-million Britons start a new business every year, with some consequently boosting their level of wealth, leading to predictions of the UK topping the list for high net worth households in the G7 over the next decade. Bonnie Burns, protection marketing director at Legal and General, says: “High net worth customers are growing in number with property values having more than tripled in the past decade.”
She added that high net worth individuals will often require more complex underwriting when being insured, largely due to the fact that ‘standard’ insurance policies will rarely provide enough cover for the wealthier individual.
Owners of fine homes and possessions need to ensure that their insurance is a tailored high net worth (or ‘executive’) policy. It’s an area into which insurers have been quick to dive in - this is real growth territory. “The high net worth sector has witnessed rapid growth since its conception in the late 1980s when the qualifying minimum sums insured were around £250,000 for buildings and £75,000 for contents,” says Bob Trott, managing director of Oak Underwriting, a specialist high net worth insurer of high-value homes, fine art antiques, collections, silver and jewellery.
“This has been increasing over the years and rising wealth in an expensive, ageing population will see rapid growth continuing.”
He reiterates that property price increases over recent years have played a large part in that, adding: “Some insurers now define high net worth as owning a property worth £500,000 and contents worth £125,000.”
Because of the complexity of high net worth policies, it is estimated that over 80 per cent of high net worth insurance is placed via brokers, mirroring the dominant position that the broker channel has in commercial insurance.
High net worth customers tend to be ‘cash rich’ but ‘time poor’ so they tend to choose firms that can do most for them when organising high value home insurance
John Lawton, director of high net worth specialist brokers Home and Legacy, says: “The UK has among the biggest concentration of high net worth households in the world, and the number is set to increase over the next 10 years. These individuals often have the money that enables them to splash out on luxurious gifts, and insuring those items might not be a priority.
“The advantage of high net worth insurance is that it provides a level of cover above and beyond basic policies. This includes situations that are normally charged as extras on basic policies.”
It can be very difficult for an individual to assess whether they are adequately insured and many find this aspect of insurance a cause of concern. One of the services provided with the Chubb’s Masterpiece policy is the provision of an appraiser who will fully evaluate the appropriate level of cover.
Appraisers are qualified professionals who visit each individual property to document the exact rebuilding value, taking note of any special features.
Of course this raises the other big difference between high net worth and standard insurance policies – HNW specialist insurers will go the extra mile in terms of service not just because the client is paying higher premiums for more cover, but because they will want to be in a position to provide more advice and thus reduce the chances of there being any claim in the first place. The benefit is obvious given the often substantial level of claims at this end of the insurance market.
This facet is included in the approach taken by Zurich Private Clients which specialises in insurance services for high net worth clients. Since each high net worth individual has very individual needs, companies like Zurich aim to provide a bespoke service which can include a home visit service and full discussions about your insurance needs and any risk management steps that can be taken.
But it’s not just the higher value of assets that needs to be taken account of in insurance terms. Whilst those with grand assets often have the means to protect them with even grander security systems, the risk to their personal security can be somewhat harder to protect – unless the person in question is happy to spend their days locked away in a secure fortress-like home that is.
Travelling abroad brings its risks and kidnap and ransom have become very real dangers in a number of countries around the world. It’s a threat that individuals – and especially those whose businesses send staff to potentially risky places – need to take seriously, says Callum Squires of Bellwood Priestbury Insurance Brokers. He says that while each individual case is different, the basics always apply: “There are a number of precautions that everyone in high-risk countries needs to consider. Don’t take unnecessary risks, provide high-level security, and provide the best training on how to avoid a kidnap situation as well as training on how to deal with actually being kidnapped.”
He adds that it is vital to travel with the right insurance; one that offers the above training and will provide highly-skilled hostage negotiators if the worst happens. “It also covers the cost of the ransom,” he adds.
Though kidnap is rare, a more common occurrence in future is expected to be flooding which hit large parts of England earlier this year. This risk, together with the ever-present potential for wealthier individuals to be targets for theft, should help to focus attention on the need to regularly review insurance options.
High net worth customers tend to be ‘cash rich’ but ‘time poor’ so they tend to choose firms that can do most for them when organising high value home insurance. It is vital that wealthier individuals seek specialist advice on the many options and niche insurers who may be able to help with their particular needs. Time poor you may be, but the more you have to lose, the more sophisticated your approach needs to be to make sure that you have a high value home insurance policy which meets your cover needs.
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