As more houses and their contents are high net worth, the industry should sell more policies to reflect this reports Christopher McKevitt. And customers should work out whether they would be fully covered if their home fell foul of the weather.

In the High Net Worth personal lines market, the old adage, "An Englishman's home is his castle" has never been more true according to findings of an Insurance Times survey of providers and industry observers. It seems that more of us are affluent and, therefore, spending more money moving up market and filling our homes with the very best in art, antiques and artefacts that the shelves of style magazines can suggest.

Our poll of underwriters and other interested parties reveals a remarkable uniformity of opinion about aspects of the market moving forward. All of those who responded to the questionnaire expect the market to grow by between 10% and 20% in 2001. When asked to take a five-year view, similar or better rates of growth were expected. Providers say that by 2005 the market could be worth anything between £750m and in excess of £1bn in terms of premium income.

Many providers say that this will be driven by the sheer weight of numbers signing up for high net worth policies. Some take a more scientific approach. They point out that Britain's high net worth market has reached sufficient critical mass and maturity to allow the actuarial profession to start number crunching with an improved level of sophistication. Their findings suggest the market is currently being undersold to consumers, and that means premium increases irrespective of any consideration of recent flooding events around the country.

"Forget any increases associated with flooding and storms," says John Simms, head of UK personal lines at Chubb. "Over the past five years the market overall has been underpriced by around 20%. We need to have an increase to achieve stability."

Clare Pardy, development manager at art and antiques specialist underwriter Axa-Nordstern Art, believes that many companies offering high net worth on the bricks-and-mortar front have been losing money. "From broker intelligence, increases of 15% to 20% are likely from some markets next year."

Sector increase inevitable
At Royal & Sunalliance, Primechoice manager John Hollis believes rate increases in the high net worth sector are inevitable and are closely linked with performance variations across the business. "It's too soon to say if the recent weather events will have any impact on future premium levels," he says. "In any event, we were not taken by surprise by the storms and floods. They are standard insured perils and it is normal practice to build in an allowance for such catastrophic events."

What is also apparent from the survey findings is a high level of unease among providers about the ability of many brokers to either grow their client base or adequately tap into their existing clients when it comes to selling high net worth policies.

There was a remarkable level of disagreement among providers about how much of the market would be written by brokers in the medium term. While there was unanimous agreement that brokers would be the dominant selling force, several were unable to say how much of the market they would participate in. One provider anticipated that it would be less than 50%. No provider saw brokers with more than 70% of the market.

There were also strong disagreements within the industry about how well brokers were exploiting the potential of the high net worth market. Half of all respondents said that brokers were not maximising the potential of the market and were not adequately focused on selling high net worth policies. One respondent noted: "Brokers are not `selling' these products to their potential clients. They are frequently offering them standard policies."

An executive with one provider said that brokers ignored the high net worth market at their peril: "They put themselves at risk. They are giving other brokers a way in. If another broker sells their client a policy and there's a claim and that claim is handled well, then I think they are opening up a pretty wide gap for the client to go with the other broker."

Meanwhile, 80% of respondents said that brokers needed to broaden their appeal if they were to maximise the potential of the market. All of the respondents agreed that brokers needed to think more about strategies and opportunities to cross-sell into the high net worth market.

But insurance companies also came in for some criticism. One non-underwriting respondent believed that while the number of providers would increase in the coming years, some participants had already "overlooked" the need to get sufficient premiums to cover claims. "It has not been totally proven that present covers versus rating structure is profitable," he added.

Undoubtedly, new technologies such as the internet, interactive TV and WAP will have a role to play in the high net worth market of the future according to the survey. However, the impact of these technologies on customer relationship management will be limited, with no provider confident that such applications would appeal to more than 20% of their client base, and the vast majority put it at less than 10%.

The most useful applications of new technology will relate to routine communication in relation to reminders to renew policies and responses to specific client queries. All respondent providers envisaged using technologies for this purpose. Around 75% of respondents felt that the technology could be used for active account management, for example adding and subtracting assets to and from the policy document. Only 50% thought it would be useful for cross-selling purposes.

Another respondent felt that internet security was a major hurdle to overcome, "pending advancement in security of systems, and customers' perception that such security is there."

Another was more blunt in his comments, stating that he could not imagine his clients being comfortable with the idea of having details of their valuable assets stored electronically, especially while the technology was still largely at the mercy of the hackers. It seems that however much the encoding and encryption specialists may successfully convince providers, providers would have a much more difficult job convincing their own customers.

Chubb's Simms is one of a number of providers who would like to harness the new technologies and the flexibilities it might afford to streamline account maintenance. The average Chubb policy incurs 2.2 changes each year creating a massive level of paperwork for staff and brokers.

Storms and flooding
Meanwhile, Britain's November storms and flooding incidents have kept some of Britain's high net worth providers busier than others. Chubb reports that it has had more than 300 claims lodged to-date, though most of these have been routine.

Cox Underwriting Services and Royal & Sunalliance have around 100 each while specialist art insurers Axa-Nordstern Art has had just four. RSA says its ratio of storm damage to flood damage claims is around three-to-one.

According to Axa-Nordstern's Clare Pardy high net worth clients can expect a "speedy and sympathetic response, constructive advice - particularly on specialist antiques restoration and conservation, alternative accommodation and generous interim payments."

The underwriter's most expensive claim to date has been a bronze garden sculpture with an insurance value of £9,000 that was blown over in one of the storms. Pardy says the firm hopes the art work will not be a total loss and specialist conservators were hastily deployed to the case.

By comparison, Cox Underwriting Services has set aside £97,800 for one claim in Yalding in the Medway area of Kent, a region especially badly hit in last year's storms.

Leaving the financial cost to one side, the recent bad storms should act as an incentive for householders to more seriously consider upgrading to a high net worth policy. However, insurers are not planning to build any marketing package on the back of the storms. "The past few weeks have given us an opportunity to reinforce our published service standards across all areas of our Sterling household product range," says Cox Underwriting Services managing director, Doug Harman.

No discrimination
Royal & Sunalliance's Hollis agrees: "Our aim is not to discriminate against customers purely by virtue of the level of premium they pay. Where we will often expend more effort is in the monitoring of these services and the feedback of information to intermediaries and customers in terms of progress on their claims."

Among the claims RSA is currently nursing in the high net worth sector is one for flooding to the basement of a listed building with a refurbishment price tag of £120,000.

Needless to say, most insurers are concerned about the apparently increasing acreage of land in Britain lying in flood plains. Simms of Chubb sums up the mood of many when he says that the industry generally will look for a new emphasis on flood defences. "Historically, all the money has been spent on coastal flood defences," he points out, adding that there is a good argument for more spending to stem Britain's rising inland water levels.

And with the November floods repeated again in early December and failure in Copenhagen to agree climate control measures, it would seem that the insurance industry will have some very busy years ahead if large swathes of the country are not to become uninsurable.