John Sims advises on insuring the home wine collection
The wine market is unquestionably growing fast. In the past five years sales of wine in the UK have risen by over 30%, according to research firm Mintel, partly because of the increasing number of women drinkers.
But it is at home that we have witnessed the real revolution. The Chubb Insurance Wine Report, published in September, points to a 40% increase in the value of wine stocks held in the home since 2000. Ten years ago only 10% of the houses our high-net-worth clients visited would have a wine cellar, now more than 50% of clients have a significant home wine collection.
It's thought that the increase in wine investment is a contributory factor, along with wine cellars and specialist units being the 'must have' home accessory.
But it's not just the rich who are enjoying keeping more wine in their homes. In analysing attitudes the report points to four types of drinker, differentiated by their wine buying and storing habits:
Exposure to risk for each group is very different (see box).
What is certain is that there's no off-the-shelf solution to all their insurance needs. Standard household insurers will cover small quantities of wine under general contents and some insurers will allow for a temporary increase in wine brought home for a wedding or Christmas.
However, homeowners with significant wine stocks in their cellars or storage rooms - the imbibers and stockpilers - need specialist cover and should have their collections properly valued and their storage methods evaluated. This applies to wine collections valued upwards from £2,000 which, given the rising cost of wine, may consist of only a few cases under the stairs. Regular valuations are vital to keep abreast of market prices and not lag behind on sums insured.
The big problem is under-insurance. The wine report shows that 65% of homeowners completely overlook their wine as an item to insure.
Hidden away
Perhaps because, unlike fine art or jewellery, the wine is less visible hidden away in the cellar or under the stairs.
And 85% of those who remember their wine collections under-value them - sometimes by as much as 250%. In one notorious case a client said he had recently received "a few cases of wine".
Wine had not been listed on the schedule and when they were valued the 'few cases' turned out to be worth £750,000.
This alarming level of under-insurance ' ' presents a real opportunity for brokers. I know that many brokers are nervous about getting involved in a specialist market such as wine. But there is no need for this hesitancy. Specialist advice is available within the market from insurers, who in turn will call in leading wine consultants to value the stock or advise on storage conditions.
The broker's role, as always, is to identify the risks for the client and find the best way to manage them. It may simply involve tracking down the home wine collection, making a judgment on security and suitability of the conditions of storage and arranging appropriate insurance cover.
To help with this process, it may be worthwhile for a broker to team up with a local wine merchant. Wine expert Berry Bros & Rudd states that this has proven to be an excellent route to increase business for both parties. The advantages are clear - it offers complementary expertise, as well as cross-marketing opportunities to your client databases.
Wine merchants sell to high-net-worth clients whose collections are likely to be at risk. And a wine-tasting party for commercial clients could be just one very pleasant way of alerting wealthy customers to the perils threatening their cellars.
Guidance on storage and risk management is clearly very important. Our home appraisers find fine wines stored in all sorts of strange and unsuitable places - next to the oven in the kitchen, in sheds and under the bed. Even when wine is in a specialist storage area, it's vital to review the conditions - flooding, for instance, is a constant and increasing threat.
With uncertainty in the stock markets, wine has also become a popular investment route. Returns have been good - in the region of 15% pa over the past five years and, in a worst case scenario, you can always drink your investment, which can't be said for share certificates.
Of course, the resale value of fine wine depends on good storage - that means not only controlling temperature, humidity and light but ensuring that the bottles and also the labels are in tiptop condition.
All wine collectors need to be protected against a broad range of losses including fire, theft and accidental damage and coverage should be 'all risk'. Policyholders need to feel reassured that wherever their wine is kept, they are covered to enjoy it, in their holiday homes or even on their boat.
There are other areas, too, on which a high-net-worth insurer will focus. Take a typical claim involving a wine collection worth £45,000 which suffered water damage from a leaking pipe. About 55% of the wine labels were damaged or peeled off.
Loss in value
The claim was settled on a 'loss in value' basis because the policyholder didn't want to lose wine that was still drinkable. So £9,900 was paid out for the 40% loss in market value to the damaged bottles. It is unlikely that a standard home insurer would have paid anything, as 'loss in value' is not normally offered.
Offering your clients peace of mind and a level of certainty about claim settlements always pays dividends in the long term. So it is a good idea, for instance, to provide cover on the basis of an 'agreed value' and to ensure that new acquisitions are automatically covered from the moment of purchase.
The perils range from vengeful spouses and out-of-control teenage parties to failing temperature-control units. Not all are insurable, but policyholders need to face up to the risks. A grateful wine collector whose precious assets are well protected will, I'm sure, be much more inclined to share a good bottle or two with his broker. IT
' John Sims is European head of personal insurance at Chubb Insurance
The Chubb Insurance Wine Report is available free from Faye Pamplin, Chubb Insurance.
Tel: 020 7895 3224 or fpamplin@chubb.com