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SPECIAL FEATURE: What’s a client worth?

Sam Cordon

October 1, 2013

Believe it or not, the number of millionaire households in Britain grew by 98,000 in 2012. According to Boston Consulting Group’s Global Wealth Report, there are now 509,000 millionaire households in the UK. That represents an increase of almost a quarter on the previous year.

While many households are struggling to just get by in this economic climate, others are clearly thriving, creating a significant pool of business for intermediaries to target at the mid to high net worth end of the market.

Of course getting access to those mid to High Net Worth clients is not without its challenges, but targeting their home insurance could be a very effective strategy to get a foot in the door. Like non-standard household cover, it’s another area that is not well served by the aggregators.

Underinsurance in the upper strata

Underinsurance has dogged the home insurance space as a whole for many years, but there are indications that it is a particular problem in the mid and HNW markets.

A recent survey of financial services intermediaries conducted by a leading insurer in the HNW sector revealed that 50% of HNW individuals do not have a specialist home insurance product. Based on figures from Datamonitor, this equates to a potential market of almost 120,000 people.

Furthermore, 97% of the intermediary respondents in that survey also said that their mid and HNW clients typically underestimated their sums insured. Almost half the intermediaries questioned stated that at least 60% of their clients regularly underestimate the replacement value of their possessions. The poll also identified the scale of that underestimation… an average of 43%.

There is of course a caveat to be applied in reading these findings of in that there appears to be some confusion amongst intermediaries over what constitutes a mid to high net worth client. Not surprising given the absence of a consistent definition by insurers.

What exactly is High Net Worth?

While there may not be industry-wide consensus on values, as a rule of thumb, insurers tend to regard sums insured of £200,000 for contents and £1m for buildings as High Net Worth, and between £75,000 and £99,000 for contents and between £350,000 and £500,000 for buildings as mid net worth. This is certainly consistent with the mid to High Net Worth products that you can access via The Source.

An untapped opportunity to advise and profit

This is where we see intermediaries coming into their own. They are in an ideal position to explain the implications of underinsurance and ensure that their clients have adequate cover for the replacement value of their possessions, as well as appropriate specialist cover for fine art, antiques, collections and the like, engenders client trust and so supports client retention. With an accurate assessment of their buildings and contents, clients will walk away confident that they have the right level of cover and have paid the right price.

That level of service and advice is not something that a comparison site can ever deliver, and looking at the research results quoted above, there is a sizable opportunity in identifying and advising those HNW individuals who don’t know that their standard policy leaves them underinsured.

As well as providing the client with a professional service and engendering trust – both vitally important at the top end of the food chain – tailoring home insurance products to the client’s exact needs enables the intermediary to demonstrate their expertise and build long-term and hopefully profitable relationships stretching into other product areas too. Then there are the straightforward pecuniary benefits of ensuring the client has the right cover.

As remuneration is based on the premium, a more accurate sum insured may mean increased commission, so it’s worth taking another look at your existing clients from this perspective. Given the apparent level of underinsurance in this sector, there’s a high probability that this alone could translate into a boost in income for many intermediaries.


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