Seven in 10 brokers say underinsurance is an issue for HNW clients – Ecclesiastical

Four in five believe that there is a problem with HNW clients being underinsured

Seven in 10 brokers say underinsurance is an issue for HNW clients – Ecclesiastical

Insurance News

By Kenneth Araullo

New research from Ecclesiastical revealed that 68% of brokers believe underinsurance to be more of an issue for high-net-worth (HNW) clients than ever before as inflation and the cost-of-living crisis continues.

The specialist insurer’s study also found that 77% of brokers believe that there is a problem with underinsurance in the HNWS market as the figure rose 5% from the previous year. In fact, of the 119 brokers questioned for the study, 25% believe that all HNW clients are underinsured. Despite these figures, only 30% of broker clients are concerned that they may be underinsured.

Areas most underinsured are:

  • Buildings at 69%
  • Jewellery at 56%
  • Contents at 53%
  • Watches at 50%
  • Art at 31%
  • Antiques at 29%
  • Handbags at 25%
  • Clothes at 23%
  • Whisky/wine collections at 23%

Ecclesiastical also gathered the top reasons on why brokers think HNW clients are underinsured:

  • Lack of awareness of the huge rise of rebuild/repair costs at 79%
  • Out of date valuations at 78%
  • Lack of awareness of the value of buildings/contents at 75%
  • Inflation at 66%
  • Clients not wanting to pay higher premiums at 61%

Inflation is also driving cost-cutting for HNW clients; 15% of brokers reported that their clients had reduced their insurance cover during the past year, while 27% expect more will do so in the future.

Addressing underinsurance in HNW clients

Of all the risks associated with the issue, out-of-date valuations stand out the most for HNW clients. Almost three quarters of brokers surveyed believe that HNW clients have insurance based on valuations over five years old, and about a quarter say that their clients’ valuations exceed a decade old.

Due to the global economic climate that is driving prices up across all industries, Ecclesiastical said that value of luxury goods such as high-end watches have continued to soar. This may lead to some clients not realising the current value of what they own, which could end up in them being underinsured.

The specialist insurer recommended HNW clients to review their sums insured annually to ensure their possessions are insured correctly. Fast-appreciating items such as jewellery and watches should be revalued every three years, while those with more stable values like fine art, porcelain, and antiques should be assessed once every five years.

The study did have some silver linings, as nine out of 10 brokers are taking proactive steps to reduce the risk of underinsurance with their HNW clients. These steps include talking through the risks of being underinsured, encouraging rebuild cost assessments, advising clients to obtain up-to-date valuations, and reviewing contents and sums insured. However, seven in 10 still believe that HNW clients need more support and guidance to understand the risks of underinsurance.

“Underinsurance has always been an issue in the high-net-worth sector, but now, set against a backdrop of continued high inflation, our research has found seven in 10 brokers believe underinsurance is more of an issue for HNW clients than ever before,” said Sarah Willighby, Ecclesiastical art and private client business director. “It’s more important than ever that brokers are speaking to their clients to ensure they are keeping valuations up to date. While high-net-worth clients may have existing valuations, the prices and values of many precious items are increasing rapidly, and valuations can quickly get out of date. Brokers play a vital role in ensuring their clients have the correct cover in place.”

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