Related: Read another article by Paul Morrissette “Navigate a Difficult Market.”

Before we explore some of these risks, there is an ancillary message to the above. Every independent agent eventually faces the choice of either specializing in certain niches or continuing to grow their business by casting a wide net. For Peck's personal lines business, the answer was clear.

In today's highly competitive homeowners' and automobile insurance business, one way to stand out in the crowd is by possessing singular knowledge and skills and representing specialty insurance markets. Accumulate these and there is money to be made. As Peck put it, “There is a solid argument to make to high net worth people that they need more specialized products and services beyond what direct writers and mass market agents provide.”

Deep Pockets

So who are these high net worth individuals? There is no threshold indicating when one enters such ranks, but a good rule of thumb is anyone earning upward of $500,000 a year with at least $5 million in total assets is on top of the ladder of success. Such people enjoy busy social lives and careers and don't have time to discuss their insurance needs with agents. In effect, they're relying on their insurance intermediaries to address whatever risks might befall them. The question arises: Is that agent up to snuff?

For instance, has the agent ensured adequate limits of liability protection for automobile and homeowners' exposures that are commensurate with the insured's wealth? Has he or she advocated the purchase of an excess liability policy? Are there sufficient uninsured and underinsured motorist's limits? Was the replacement cost value of the person's home properly evaluated, and is there appropriate property coverage for natural disaster risks? Are there limitations in the valuable articles endorsement with regard to coverages? Finally, and critically, are the liability components of the client's automobile, home, watercraft, umbrella and other personal insurance policies integrated into a seamless plan of financial protection? 

Atypical threats affect the affluent. Busy social lives often call for more parties and other social events at home, confronting the host with financially devastating liquor liability exposures. Given their deeper pockets, issues like slander and defamation of character loom larger when 14-year-old Bob Smith, Jr., makes a derogatory comment about his teacher on Facebook. And if Bob Jr. gets into an automobile accident in his father's Mercedes that results in the death or long-term injury of an occupant, pedestrian or another motorist, a jury likely will have little sympathy for the rich kid. Such wrongful death verdicts easily can exceed $20 million.

The wealthier among us are at greater risk of employment practices liability, if for no other reason than they have the financial depth to hire housekeepers, nannies, gardeners, cooks and drivers, rendering them vulnerable to potential lawsuits for discrimination in hiring, sexual harassment and wrongful job termination. People of significant means and public stature also are at higher risk of kidnap and extortion schemes and identity theft.

Related: Read the article “The Value Is In The Service” by Gary Stephen.

Unlike many average income earners, high net worth individuals may sit on the boards of non-profit and public companies. In such situations, their entire wealth may be subject to seizure if the organization does not have proper D&O insurance or adequate limits of protection. 

Finally, most of the wealth of high net worth people is tied up in their investment portfolios, which are not insurable. The rest—their homes, cars, other property, and liability—is insurable. The question is: Do they have what they need to transfer the related risks and thereby preserve their prosperity?

Becoming a Specialist

This is why it makes so much sense for a specialist independent agent to step in and provide service of immeasurable value. Much like attorneys, accountants, financial advisors and other professionals serving a high net worth clientele, agents like Peck have found a profitable niche. Just in time, too, for some clients. “I can't tell you how many times I meet someone of significant wealth with a low cost and low coverage automobile insurance policy they heard about in a TV commercial,” Peck said. “That's so very dangerous.”

Peck also has encountered more than one affluent individual who had to pry dollars from their insurance carriers for legitimate claims. “I tell them if you want someone as an advocate, get an independent agent,” he says. “I had a client recently with a $3 million house and put $1 million into renovating it. He asked me to get the carrier to reappraise it. I told him it wasn't necessary, as he had a replacement cost extension built into his policy and the carrier was comfortable increasing it to the higher value based on an earlier appraisal.”

Related: Read the article by Mark E. Ruquet “The Education of High-Net-Worth Producers.”

The very few insurance carriers serving the high net worth marketplace also provide valuable services that are generally unavailable in a commoditized insurance environment. Such services run the gamut, and readers are advised to check them out. One example is Chubb's Wildfire Defense Services. A policyholder living in a region prone to forest fires benefits from trained private firefighting personnel who are deployed to protect the person's home with fire-blocking gel when the area is threatened by fire. “My own philosophy is that the services provided by these carriers is what separates them from all other insurers,” Peck said.

So how did Peck become a specialist serving a high net worth clientele? “The best advice I could give other agents is to recognize that there is something different when it comes to this class of people and the risks they face,” he said. “Recognizing these differences and then learning all about the products and services offered by the specialty carriers got me going.”

And going. Steve reaches out to high net worth people in his area by getting to know other professionals like accountants and attorneys serving these individuals. Many financial planners, in fact, actively recruit independent agents to assist them in evaluating their clients' risk profiles. Clients will seek an agent out once the agent makes it known that he has what it takes to provide such specialized service.

Not everybody is making the big dollars today, especially in this uncertain economy. But those who do are in need of specialized risk and insurance attention. Who meets the insurance needs of the affluent in your community?  Maybe your firm will follow in Steve Peck's footsteps and reap the benefits that come with insuring high net worth individuals.