The Affluent: The Attitude is Different

F. Scott Fitzgerald, the American short-story writer and novelist who chronicled the Jazz Age of the 1920s, once observed that the rich are different. But in the 21st Century global economy, just how are affluent consumers different than other consumers? They’re different not only in income. Many in the affluent market are different in their attitudes, and that has an impact on agents serving their risk management needs.

They’re willing to pay for service.
From our perspective in serving the affluent market, we find that the affluent demand a different standard of service. But they are willing to pay for it. Agents and brokers who match up with that philosophy are effective in the long run. They guide clients to an effective overall risk-management approach to their homes, automobiles and valued possessions.

Claims service is “where the rubber meets the road.” In the general market, many homeowners and automobile claims look alike. In the affluent market, claims can be unusual: the affluent policyholder whose home has a fire expects to live in comparable surroundings during the nine-month period while their 5,500 square foot home is rebuilt. And, the insured and their family will expect to drive comparable vehicles to those in the four-car garage.

They want strong insurance advice.
The affluent expect expertise, professionalism and strong advice. An agent recently relayed a story about a successful executive client who questioned why he needed a high deductible on his homeowners policy. The agent responded that because he was conscientious and careful with his home and possessions, he was unlikely to have a small claim. The agent reminded him that his insurance was protecting against a catastrophe—and, in that event, he had the financial resources to readily cover a $2,500 deductible.

Many affluent consumers fall short in risk management in neglecting excess liability risk. Agents can step up in this area and advise clients that an umbrella policy is often a “must-have” basic protection.

They don’t stand still.
The affluent don’t stand still, either professionally or personally. Their lives constantly change at their own direction. This may mean that new vehicles may be added on a regular basis, or that a weekend shopping trip results in $50,000 in new home furnishings.

One product feature that fits the affluent marketplace is a level of contents coverage on a homeowners policy that is equal to 70 percent of the value of the home. Another feature tailored for this market is full, guaranteed replacement-cost coverage for a home. While it’s an extra in the general market, it is standard for the affluent market. One reason: the cost of rebuilding a home purchased 10 years ago and insured for $750,000 likely will have appreciated greatly each year. A standard policy insuring it for $1 million could cause two things: a lawsuit and an E&O claim for the agent who sold it. Replacement-cost coverage shifts both the risks of rising construction costs and the changes in the home to the insurer.

They expect choice and innovation.
The affluent may not always buy the most expensive or newest products and services, but they do want to be offered the choice. That is as true in insurance as it is in home electronics. This drives innovation among affluent insurance carriers. One recent example is the “deductible reserve” program that effectively reduces the deductible on a high-deductible policy for each year the policyholder is claim-free.

They expect clout.
The affluent expect to get an appropriate level of attention from those they deal with in their financial lives. Effective independent agents can support this expectation by providing affluent consumers with package policies that incorporate homeowners, automobile and umbrella liability coverages into a master policy. The master policy has important benefits for the consumer: comprehensive coverage, discounts, streamlined service and billing, and a higher level of importance to the carrier. Agents and carriers benefit too, through higher renewal rates and steadier long-term profitability.

Daniel H. Olmsted (daniel_h_olmsted@atlanticmutual.com) heads Atlantic Mutual’s insurance operations, which are solely focused on the affluent personal lines marketplace.