Insurers are piling into the HNW sector, but there are pitfalls
Recent months have seen a flurry of activity in the high net worth and mid net worth sectors.
Norwich Union has launched a high net worth product, Distinct, to take on the giants of the sector Chubb and Hiscox. Meanwhile, Zurich and AXA launched their own offerings for the mid net worth sector this year.
Even motor trade specialist Tradex is having a crack at the market with its own offering for wealthy families with multiple vehicles.
It seems most insurers are looking at the market for insuring the home, valuables and vehicles of the affluent - and seeing something attractive.
One of the reasons is that it is a largely untapped market. Insurers’ penetration is relatively low, with many affluent people insured on standard household policy.
Research by Datamonitor indicates that the number of HNW individuals with more than £200,000 in onshore liquid assets in UK will break through the 1 million barrier this year. Young people, it says, are becoming richer faster than any other age group.
The number of MNW individuals could easily encompass 300,000 and is set to grow as people become wealthier.
Another reason for the attractiveness of the HNW and MNW sectors is rating stability. Compared to the fiercely competitive standard home and motor markets, the HNW and MNW sectors are relatively stable in terms of the pricing cycle.
Of course, the difficulty insurers face is persuading people to pay more for a HNW or MNW product, which is a feat not only of marketing but also service.
Chubb for instance is well know for its high quality HNW service and has won awards on the back of it.
But get service wrong and the results can be damaging.
NU admits that it made mistakes with its old MNW product, Tapestry. It was unable to deliver the necessary service and the business failed to thrive as expected.
It is for this reason that service has become central to NU’s new HNW product.
Insurers have laid out their stalls. It remains to be seen how many will succeed.