Around two thirds of HNW customer properties are 50% underinsured and the valuation of the contents inside fares little better, meaning specialist brokers have plenty of opportunity to sell extra cover and showcase their expertise to HNW clients.
Indeed, Tim Slattery, a senior underwriter at Hiscox
, finds that the newly minted HNW generation (those from Generation X and the Millennials), tend to go online to buy insurance. “We think there’s a target market of 500,000 HNW individuals in the UK, but only one third buy insurance in the broker world. This means there’s an opportunity to tap into the other two thirds.”
Slattery told Insurance Business UK
that underinsurance of buildings is a bigger issue in the HNW sector. “It’s important to get the best valuation of the property from the outset, but the actual mortgage valuation is typically some ways off,” he said. “Then you tend to have higher quality materials and more bespoke fixtures and fittings, which increase the value, as well as improvement works, which could be a loft extension but could also be something like a new kitchen.”
For the contents inside the house, the story is much the same, especially since HNW individuals are typically more likely to own valuables such as art, wine, antiques and jewellery – something in the region of 75% of HNW homes in the UK are thought to be underinsured, according to Hiscox
Chyna Whitaker, broker at Ellis David, said the underinsurance is usually an oversight. “Clients don’t do it on purpose – they just don’t know the value of what they own. They work all their life to get these possessions, like a wardrobe of £5,000 suits, but then they don’t know how to value it,” she said.
Also, high-value items such as art, antiques or jewellery tend to increase in value, meaning written valuations held by policyholders quickly become outdated and are woefully inadequate when used as a guide for replacement cost. Clients are often not aware if there is a Principle of Average clause in place, but even if there isn’t one, if the value declared is still under estimated, a client could be significantly out of pocket and unable to replace the lost, stolen or damaged item.
Then in extreme cases, where valuations are proven to be significantly wide of the true value, and where the policy wording provides particular protection to the insurer, the insurer may choose to void the policy altogether. Whitaker relates the case of a customer who was only insured for £25,000 worth of contents found themselves completely uninsured when the loss adjuster found that replacing all items taken would actually cost around £125,000.
The paradox is that HNW customers, according to both Whitaker and Slattery, should actually be more
likely to use a broker for insurance, as brokers can provide more tailored policies that not only establish the true value of a HNW client’s more complicated list of assets but also offer the best value in terms of premium.