How to help affluent clients find the right insurance coverage

For the first time, high-net-worth individual wealth has surpassed the $70 trillion benchmark, according to Capgemini’s 2018 World Wealth Report. While this unprecedented level of wealth is certainly keeping wealth managers and financial advisors busy, it’s also having a significant impact on independent agents and brokers. Or, at least, it should be.

Instead, many successful clients fail to recognize how the changing nature of risk can potentially impact their wealth. This is especially concerning given that many property & casualty exposures are growing quickly in terms of both frequency and cost.

Now, more than ever, it is important for clients to have the right coverage with the right carrier. One perfect example is ensuring client homes are insured for their full replacement cost, rather than for some depreciated amount. Here’s more on how you can help them find the right fit.

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Contextualize their growing risk exposure

In the last 17 years, Munich Re found that the frequency of U.S. weather events has doubled, with significant increases in all types of weather categories, including winter storms, hail, flooding and wildfires.  In 2018 alone, events like Hurricanes Michael and Florence, the Woolsey Camp Fires, as well as heat waves and tropical cyclones resulted in a total global economic loss of $155 billion, as reported by Swiss Re. These events also drove the fourth highest number of insured losses.

When claims do occur — regardless of whether they are catastrophe-related or not — they’re also getting more expensive to resolve. Chubb data, for instance, shows that water losses (from both weather and burst pipes) paid from 2015 to 2017 almost doubled from those during 2012 to 2015. Additionally, such losses over $500,000 have more than doubled since 2015, and those over $1 million have tripled.

While the increasing cost of claims is naturally connected to the damage done by the claim source, it’s also associated with the rising cost to repair damage. In states like California, Florida and Texas, home to a sizeable population of successful individuals, reconstruction costs from April 2017 to April 2018 increased between 6.26% and 7.11%.

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Desirable living, but high-risk, coastal states like Georgia, South Carolina and North Carolina also saw increases between 5.5% and 6.14%. In many cases, these increases are driven by demand and a lack of skilled labor. Subsequently, these factors also mean homeowners could be out of their home for longer periods of time, driving up related temporary living costs.

The cost to replace new technologies, common in the homes of successful individuals, is also inflating claims pricing. According to manufacturer websites and recent media coverage, the cost to replace a top-of-the-line  Sub-Zero fridge, for instance, went from $5,000 in 2000 to $16,950 in 2018 (a 130% increase). The highest quality Miele dishwasher also saw a 93% increase, from $2,000 in 2000 to $5,699 in 2018. For insurers, like Chubb, that offer clients replacement cost coverage, and not actual cash value protection, this makes it more expensive to resolve a claim.

Highlight why they might be under-insured

It’s clear that experiencing a major property and casualty loss is often costly and inconvenient.  Yet, despite the growing frequency and increasing cost of claims, many successful individuals and families are not yet adequately protected.

However, there is good news because consumers are shopping. A new study of consumer insurance purchasing habits by Chubb found that the number one group most likely to shop online for home insurance is successful families and individuals — or high net worth consumers. In fact, the high net worth consumer is actually twice as likely to shop online for insurance as compared to a mid-market consumer.

This creates a unique opportunity for independent agents to drive differentiation and market their value and expertise to a consumer that is served by direct writers a great majority of the time. Taken together, not only are successful individuals largely relying on a standard carrier to protect against their unique risk profiles, but they’re also doing more research online where independent agents and brokers can reach them.

Related: 12 reasons insurance agents still need to prospect

Emphasize the simplicity of finding the right coverage

Successful families and individuals are open to working with independent agents and brokers and see value in doing so. Based on the data above, adequate coverage from a carrier that understands the unique risks they encounter is a critical need — suggesting ample opportunity for independent agents and brokers to help these prospective clients find the right plan and, in turn, a significant business boost.

For instance, the same Chubb study found that that the number one advantage of using an independent agent or broker cited by successful individuals is that they are more knowledgeable about what policies cover and what additional options are available. These clients understand the intrinsic value offered and want to gain access to that expertise. They have shared they’re actually willing to pay a premium to ensure they get the best coverage to protect their future. Play to that strength in helping them. Consider:

• Leveraging the new year to inspire your clients to reassess the value of their homes.
• Re-engaging prospects underserved by standard insurers with language that resonates.
• Partnering with financial advisors to ensure shared clients are fully protected.

The likelihood of clients being impacted by a significant event — weather or otherwise — is not in question. How they’ll be able to recover, however, is. Ensuring they have the right coverage in place is critical.

Ana Robic is chief operating officer at Chubb Personal Risk Services. She can be contacted at arobic@chubb.com.

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