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Why insurance brokers hold the key to luxury

Why insurance brokers hold the key to luxury | Insurance Business

Why insurance brokers hold the key to luxury

Luxury. Defined as “a state of great comfort or elegance, especially when involving great expense,” - it’s desired by almost all and achieved regularly by few (unless you count getting out of a hot shower into a bed with freshly washed sheets, which is by definition ‘heaven’).

The luxury that surrounds royalty, musicians, actors, models and billionaires is arguably part of what keeps us fascinated with them, why they grace the pages of magazines and now in the digital age have millions of followers on Instagram.

Now estate agent Knight Frank has completed its annual wealth report, offering an overview of all things wealth-related, including investment and luxury from across the world. The report highlights that despite the focus on hubs like Silicon Valley, Dubai and Singapore, London has the highest concentration of ultra-high-net-worth individuals (UHNWI) in the world.

UHNWIs are defined as someone who has a constant net worth of more than US$30 million (£22.7 million) - and there are 4,944 such individuals in London.

New York still has the most billionaires, with 94, and Tokyo has the most high-net-worth individuals (those with a net worth over US$1 million or £758,000) with 488,582.

Additionally, Knight Frank ranked the luxury items that have increased in value the most over the last 12 months. Rare whiskey topped the list with a huge 40% increase in value, followed by coins at 12%, then wine and art at 9%. Watches (5% increase), cars (2% increase) and furniture (1% increase) didn’t jump as dramatically but fared better than jewellery, which decreased in value by 5%.

This, of course, leads to an important question about insurance - given that, according to Andrew Reid (pictured) from Home & Legacy, many people are underinsured when it comes to their luxury items.

“I think there are a lot of people who are not adequately protected and not through design but through having an inappropriate policy, which has inbuilt inner limits which they’re not aware of,” Reid said.

“It may be that people are not aware that they’re limited on individual items. So, it’s important to have a product that has generous single article limits, I think that’s the key message.”

One of the best ways to avoid under-insurance, Reid said, is for those looking to insure luxury items to engage a broker to get the best policy for them. This way they will have someone with experience who can make sure they don’t miss anything when buying insurance.

“We are in a space where we value very greatly the relationship that we have with retail brokers,” he said. “In the high net worth space, ultra-high-net-worth individuals, we feel generally are best served by dealing with an independent broker who can give them specialist advice and respond to their needs.

“They’ll speak to the customer and do a fact find - then they’ll know which are the right products for the right customers. I think in this space, particularly where the needs become complex, that’s where a customer will see the greatest value in dealing with a professional broker.”

A broker can also find cover with specific clauses that can cope with dramatic increases in value to items, like that rare whiskey has seen in the last 12 months. Reid explains that Home & Legacy has such a clause in its cover, making it easy for customers if the market changes drastically.

“There’s a specific additional benefit that we have called market appreciation cover,” he explained. “That means that we’ll pay up to 150% of the sum insured on the schedule if the item has increased.

“They must have a valuation in the last three years, but it does provide a bit more flexibility. It does protect against those fluctuations, and we’ve seen that in fine art over the last 30 years.”