Brokers are finding increasing competition in the high net worth sector but they can still have a profitable business. Caroline Jordan reports
In 2008, brokers can expect a flurry of activity from insurers in the high net worth arena.
Typically a standard policy is around £400, but mid-net cover is generally priced at around £750 and high net in excess of £2,500 – lucrative business. So, how can brokers stay on top of the pile in 2008?
High net worth insurers are looking to win new business in a number of ways. At the lower end, they may choose to go direct, as Hiscox is doing.
They may seek to support brokers in marketing campaigns, and help pinpoint clients who are underinsured on standard contracts. They may also try to encourage more brokers to cross-sell to commercial clients.
Zurich’s head of private clients, Nick Brabham, says: “Cross-selling opportunities for commercial brokers remain huge. We also think there are affinity type deals which would be highly effective.
“A typical premium with us would be around £5,000 – similar to many brokers’ smaller commercial risks. This can be attractive in commission earnings.”
Busier than ever
There are already plenty of extremely smart brokers out there that are running polished and expanding businesses.
Richard Evans, development executive of Aon Private Clients, comments: “We have a team of around 60 and cater for a wide range of clients from mid net to those with assets of £50m plus.
“Although there is talk of an economic slowdown, we have been busier than ever, so I’m confident about growth next year.”
He believes brokers will remain top dog in this market because the rich do not want the hassle of dealing with their insurance.
“They want to be able to pick up the phone or email and have someone sort it out. Every client has a named manager to look after them and a direct dial number – and I don’t see things changing.”
Heath Lambert is another familiar name and, in particular has expertise in the fine art market. Richard Northcott, executive director of Heath Lambert, says: “Success in this market comes if brokers have good people. Rich people may not be comfortable with disclosing their assets to someone they don’t know, so you need to build up trust – and work with them long term.”
He is also unconcerned about any downturn in the economy. “The UK continues to generate wealth. I’ve been through recessions before and often it seems, the rich get richer. They surround themselves with good advisers and in recent years we’ve seen hedge funds grow at a large rate, which the wealthy can take advantage of.”
Northcott believes there could be rate increases next year, driven largely by more claims. “The floods have been a main area, but insurers have also seen more claims for fire and subsidence this year.
“In the case of high net worht clients, the sums insured are not only higher, but the cost of labour is increasing and very often you need to bring in more specialist builders and craftsmen to do the work.”
High net worth is where it’s happening for 2008 – but brokers need to be prepared to invest their time and resources to get the offering right – rather than simply piling in.
Who's who in high net worth
1 Hiscox, one of the marketÃ¢â‚¬â„¢s leading players, is now actively promoting direct sales of high net worth products. Its stylish TV and print campaign, created by top agency Inferno, is called Certainty and emphasises that more than half the claims it pays out would be declined by a standard insurer. With aggregators bombarding the telly with save money messages, it is refreshing to see price is not HiscoxÃ¢â‚¬â„¢s central theme.
2 Sterling is poised to launch a new offering early next year. The company is well established in the mid net market and is now also looking to target those with contents valued in excess of Ã‚Â£250,000. Associate director Sara Greenland says: Ã¢â‚¬Å“More brokers are looking to place true high net worth business and the new product will take on these more complex risks. Advice is paramount and we are looking to talk to more brokers. This is an opportunity for them to win more business and handle attacks from other brokers.Ã¢â‚¬ÂSterling has recently appointed a high profile new senior underwriter, Alison Colver who joins from Hiscox.
3 MMA is poised to expand its proposition next year. It launched a mid net worth product, Lifestyle in 2004, which covers contents of up to Ã‚Â£120,000 or so, but is now poised to increase this limit and will offer some extra benefitsÃ¢â‚¬â€œ full details will be made shortly. Martin Scarrott, household underwriting manager, comments that a key advantage of Lifestyle is that it suits wealthier customers, but is easy to sell since it is a full cycle EDI product. Ã¢â‚¬Å“WeÃ¢â‚¬â„¢re broker only and committed to remaining so. WeÃ¢â‚¬â„¢ve been taking on board broker feedback and we think theyÃ¢â‚¬â„¢ll be pleased. This is an easy way to take on more mid net business at the higher end and place it electronically.Ã¢â‚¬Â
4 Norwich Union (NU) brokers should also expect more contact, as the insurer continues to roll out its Distinct proposition. Sam Hudson, head of service for intermediary business says feedback from the initial pilot has been positive. Ã¢â‚¬Å“WeÃ¢â‚¬â„¢re covering both ends of the spectrum with mid and high net worth, with contents starting at around Ã‚Â£75,000 and then from around Ã‚Â£150,000.Ã¢â‚¬Â NU wants Distinct to have its own classy identity Ã¢â‚¬â€œ including its own shade of yellow used in marketing. Hudson also emphasises that there are no plans to make Distinct available on a direct basis. Ã¢â‚¬Å“We firmly believe that clients benefit from advice in this area. There is a lot of potential for brokers who have large commercial books because there is a natural connection in advising the directors.Ã¢â‚¬Â
5 AIG shook up the high net market when it entered in 2003. Since then there have been numerous gripes from other insurers that the company was Ã¢â‚¬Å“aggressiveÃ¢â‚¬Â in its pricing and that it would struggle to win over brokers because the demand for another big player was not there. In fact, this has not proved the case. AIG may have been competitive in its pricing, but it is also proving increasingly popular with brokers through its service Ã¢â‚¬â€œ and indeed, is now up there with the top providers Ã¢â‚¬â€œ and plans to sign up more brokers. Ann Owen, vice president of AIGÃ¢â‚¬â„¢s UK private clients group, says: Ã¢â‚¬Å“We were a start-up and our positioning is that we focus on the high and ultra high net segments. We would not go direct, these clients need a broker. They have art collections cars, boats, extremely valuable jewellery and often add to their collections.Ã¢â‚¬Â One selling point of AIG cover is that it suits rich people who do not want to be constantly telling their broker that their sums insured have risen, she says. Ã¢â‚¬Å“Our standard policy will give a client 50% of the rebuild value of their house as contents. So, if the sum for the rebuild is Ã‚Â£1m, then the contents would be Ã‚Â£500,000. In almost all cases, this is ample, so they do not need to worry about adequate cover.Ã¢â‚¬Â