Wealthy clients failed by direct carriers’ one-size-fits-all approach
Wealth accumulation in the US is booming. The number of registered millionaires is on the rise, creating huge opportunities in the high net worth insurance space.
But while high net worth individuals enjoy the fruits of their coin, many are inadequately covered when an incident occurs. In fact, a shocking 70% of high net worth individuals do not have suitable insurance coverage in place, according to Heather Posner, associate vice president and director of high net worth at Burns & Wilcox.
Why is this coverage gap so large?
“It’s because the majority of high net worth clients tend to be with a direct carrier like an Allstate or a State Farm,” Posner told Insurance Business. “As their wealth and assets accumulate, they outgrow their insurance program, but because their captive carrier has only one product to sell, they never get access to an independent broker to get the specialty products they need.
“Insurers and brokers need to help high net worth clients understand what products special carriers provide, and coach them in how to cover every lifestyle risk they may have with specialty products and services. We need to break into that 70% and make sure folks have the right coverage in place and peace of mind to go about their lives on a day-to-day basis.”
The 70% coverage gap presents “huge opportunity” in the high net worth insurance space. The industry has started to cotton on, and new companies have entered the market space, bringing about some market consolidation.
Posner commented: “We need to have an understanding of what those consolidations mean for clients and brokers so that we can help brokers access the right markets, including some of the new entrants to the market space.”
The high net worth segment has more unique exposures compared to the more homogeneous exposures prevalent in the mass market insurance world. It requires significant expertise to service the market well.
Every single high net worth individual in the 70% coverage gap could be the owner of an original Renaissance painting, a Neoclassical vase or a vintage Ferrari. Or they might just have a couple of well-kitted-out condos in New York and Miami.
One thing’s for sure – they are all potential targets for the insurance industry. As Posner said: “There’s an immense opportunity for brokers to go after that business and provide great service and great coverage.”
Original Post: Insurance Business America