’Brokers play a vital role in ensuring their clients have the correct cover in place’, says art and private client business director

More brokers believe that the high net worth (HNW) market is experiencing an underinsurance problem amid inflation and cost of living pressures, new research from Ecclesiastical has revealed.

In a statement released today (19 June 2023), the specialist insurer highlighted that 77% of 119 brokers interviewed between March and April 2023 felt there was an issue, up 5% from the previous year.

And some 68% reported that underinsurance among HNW clients was more prevalent than ever before.

Buildings (69%), jewellery (56%), contents (53%) and watches (50%) were the areas where clients were found to be most underinsured.

This was followed by art (31%), antiques (29%), handbags (25%), clothes (23%) and whisky or wine collections (23%).

However, Ecclesiastical said just 30% of brokers felt their clients were concerned they may be underinsured.

Ecclesiastical’s art and private client business director Sarah Willoughby said that “underinsurance has always been an issue in the HNW sector”.

“But now, set against a backdrop of continued high inflation, our research has found seven in 10 brokers believe underinsurance is more of an issue for HNW clients than ever before,” she added.

Cover gap drivers

The top reasons why brokers thought HNW clients were underinsured was a lack of awareness over the rise of rebuild or repair costs (79%), out of date valuations (78%) and lack of awareness of the value of buildings / contents (75%).

This was followed by inflation (66%) and clients not wanting to pay higher premiums (61%).

Out of these reasons, brokers stated out of date valuations were a key risk for HNW clients – 73% of brokers believe HNW clients have insurance based on valuations over five years old and 24% said clients have insurance based on valuations that are over a decade old.

“It’s more important than ever that brokers are speaking to their clients to ensure they are keeping valuations up to date”, said Willoughby.

“While high net worth clients may have existing valuations, the prices and values of many precious items are increasing rapidly and valuations can quickly get out-of-date.”

Fast-appreciating items 

Ecclesiastical noted that fast-appreciating items such as jewellery and watches should be revalued every three years, while fine art, porcelain and antiques should be revalued every five years.

Considering the HNW market backdrop, the insurer highlighted that 92% of brokers were taking proactive steps to reduce the risk of underinsurance with their clients.

Nearly half (48%) have talked through the risks of being underinsured, 28% encouraged rebuild cost assessments, 20% advised clients to obtain up to date valuations and 15% reviewed contents and sums insured.

Despite this, 69% of brokers said HNW clients need more support and guidance to understand the risks of underinsurance.

”Brokers play a vital role in ensuring their clients have the correct cover in place,” Willoughby added.