Stability in the Affluent Market Shows Promise for Brokers, Insurers

The high net worth insurance market remains a stable market for agents and the insurers specializing in this exclusive class.

“From a market opportunity perspective we are seeing a market that continues to be fairly stable,” says Michelle Kenny, senior director, personal insurance underwriting, at Novato, Calif.-based Fireman’s Fund Insurance Co.

Even despite the tough economy, Kenny says the very wealthy continue to buy and accumulate assets.

Lisa Samler, vice president in personal lines, at Van Nuys, Calif.-based Momentous Insurance Brokerage Inc., an Insurance Journal Top 100 Agency, says her agency’s client base continues to grow.

“The personal lines market for affluent and high net worth customers is very large, and surprisingly it’s still growing,” Samler says.

Momentous, which specializes in insuring high profile individuals, has remained steady in its high net worth business, Samler says. “I don’t see a lot of highs and lows” in the market, she adds.

Kenny admits that even for Fireman’s Fund, high net worth premiums continue to trend slightly up.

That’s good news for agents and the few insurers specializing in the high net worth insurance market.

What has changed in this exclusive segment of the personal lines market is how the affluent view their insurance coverage, the experts say.

“The high net worth client, just like the rest of America, is being affected by both a poor economy, low interest rates on their investments and a volatile equity marketplace,” says Ray Celedinas, president and CEO of Celedinas Insurance Group based in Palm Beach Gardens, Fla. High net worth premiums may be stable or slightly up because the down economy, he adds. Tightened finances may be pushing the affluent to examine their insurance portfolio in greater detail, which may be leading to additional insurance purchases.

“Unlike years past when clients paid little attention to their renewals, they are now as concerned about the cost of their coverage as they are gaps in coverage,” Celedinas says. Celedinas Insurance Group, an Insurance Journal Top 100 Agency, also specializes in insuring the wealthy.

Fireman’s Fund Kenny agrees.

“Customers are asking their agents to take a look at their policies and evaluate the coverages that they have. Customers are uncovering coverage gaps that they didn’t know they had,” Kenny says. “And when they find out, then they are actually working with their agents to maybe buy more insurance rather than less insurance.”

For example, Fireman’s Fund insures a $22 million home in Nebraska, which sits atop a hill. As the region began to experience tremendous rain storms this year, the homeowner began to worry about flooding risk.

“He reached out to his insurance agent and said: ‘I just want to check that I have flood insurance. I assume that I do.’ The agent checked and said, “No, actually you don’t have any flood insurance.’ Nobody thought he needed it,” Kenny says. While nothing ever happened, the homeowner decided he needed to purchase flood insurance.

Samler agrees there’s a large demand for coverage review and explanation right now in the high net worth market.

“We’re doing a lot more reviews, a lot more meetings and educating with financial advisors and the clients themselves,” she adds. “They want to see what’s happening with their insurance coverage, what they’re insured for, and if they’re adequately protected.”

Business Risks for the Wealthy

Today’s high net worth client looks similar to a business risk, the experts say. The heightened attention on coverage reviews gives agents working in this sector an opportunity to offer additional coverages as well.

“High net worth clients are targets as a result of their deep pockets, and so high net worth carriers now offer coverages to protect the wealthy similar to those carried by both small and mid-sized businesses,” Celendinas says.

Coverages such as employment practices liability (EPLI) and workers’ compensation for domestic employees, directors and officers liability and even kidnap and ransom are a few newer coverages gaining some attention, says Celedinas.

Samler says coverages like EPLI and excess liability for the wealthy are becoming increasing importantly.

“I think unfortunately in this day, in these very interesting and trying times, it’s kind of like the old saying ‘desperate measures for different times,'” she says. “Even if you have a domestic employee that you decide either isn’t working out or you just don’t really want the expense any longer, there’s always that possibility that the person’s going to come back with some sort of harassment suit or wrongful termination suit if they think that there’s a possibility that they can make a quick dollar.”