There’s no corner of the insurance market untouched by the permacrisis of recent years as interconnected financial, technological, geopolitical and societal challenges shape and reshape the landscape – and insurance businesses strive to keep up. The high net worth (HNW) insurance sector in the UK is no exception, navigating literal and metaphorical storms alike as adverse weather conditions and spiking fraud present new challenges to providers, brokers and insureds.
The sector has been rocked by a number of inclement weather incidents recently, noted Amie Gavriloff (pictured), private clients team manager at the wholesale MGA iprism, with several serious named storms having torn through parts of England. Discussing some of the key trends she’s seeing impact the HNW market in the lead-up to Christmas, she highlighted that these events always lead to an increase in escape of water and flood claims – which tend to be more costly for HNW properties.
“Underground basement conversions, swimming pools and a greater number of bathrooms in these homes all add to the increased risk, and damage can be more significant, and costlier to rectify,” she said. “Underinsurance continues to be a huge concern, HNW policyholders typically own more listed properties which are more expensive to reinstate as they often require specialist labourers and a higher quality of materials.”
Another concerning trend iprism has seen – and one to be especially aware of in the run-up to Christmas – is an uptick in theft claims, she said, particularly of expensive luxury watches outside of the home. The MGA is also seeing a worrying increase in thieves following wealthy policyholders from shopping centres and stealing their goods when they are parking back at home, and it is looking to remind consumers to be extra vigilant as they’re doing their Christmas shopping.
Alongside the risks associated with luxury watches, Gavriloff said, it has been interesting to see what’s happening in the ultra-luxury handbag market, where prices have skyrocketed over the last 20 years. People now see handbags as investment pieces and as inflation-proof assets that will only increase in value. Brands such as Chanel, Hermes and Louis Vuitton have become particularly sought after, and are renowned for holding their value as time goes by.
“And of course, when one brand puts its prices up, the others follow creating a chain reaction,” she said. “Due to the increasing popularity, demand exceeds supply and there can be years-long waiting lists for some designer models. The difficulty getting hold of them makes them an even more coveted purchase and drives up prices of second-hand pieces.
“We’ve also seen changes in production costs, with higher material and labour costs and the demand for specialist craftsman. Worth noting as well is that as the number of working women has increased, there’s been more disposable income available to buy these bags.”
This evolution has led to the development of quite a pronounced protection gap, she said, as when reviewing their contents, clients don’t often consider the increase in value of their handbags and the increased cost associated with replacing new for old. Annual indexation alone isn’t enough to cover the increase in value of these items - Chanel, for instance, has increased its handbag prices four times since March 2020.
“Home insurance generally doesn’t cover loss of value due to wear and tear,” she said, “so owners may think they are covered at a value beyond what the bag is worth.”
Leading iprism’s private clients team – which is comprised of five dedicated HNW underwriters who support brokers and their clients with their HNW business – Gavriloff emphasised the importance of delivering a flexible, knowledgeable and professional service to brokers. While not traditionally known for HNW, iprism has been in the market for over a decade now, she said, and has three bespoke private clients products.
“My role in the team is incredibly varied, I underwrite new and existing business and work with brokers and insurers to develop our partnerships,” she said. “People are the key to our business, and I love getting to know our brokers and helping to provide them with solutions to help their clients.
“I really enjoy the nature of HNW risks, no risk is the same and I love the challenge of finding a way to underwrite around the complexities each case brings to ensure the right outcome when a claim occurs.”
Brokers play a critical role in helping HNW customers avoid expensive losses, Gavriloff said, and she emphasised the importance of brokers performing full contents reviews with their clients, at least once a year.
Brokers can offer a value-add service by suggesting inventories and specialist valuers to ensure assets are insured for their full, true value. It’s also important not to just accept a figure offered by a client, she said, but rather to find out how that figure has been calculated and what additional factors they have considered.
Sharing some of her key advice for HNW brokers as the Christmas season unfolds, she noted that it’s a period where HNW homes are a significant target for thieves over the Christmas season. Burglars know there will be expensive gifts ready for the taking, she said, and that people may be out of the property more frequently as they visit friends and relatives, or take a winter vacation.
“If clients are travelling over the Christmas break, educate them on the importance of keeping that information off social media,” she advised. “Posting from abroad on an open channel shows would-be thieves that their house is empty, they must consider who can see their posts and what they’re advertising to potential thieves.”
In addition, winter generally brings bad weather, she said, and this can lead to burst pipes. If clients are going away for a long period, brokers should encourage them to consider having someone check on their home for them, installing a leak bot or shutting off the water/leaving the heating on. Escape of water claims can be incredibly disruptive as damage can be extensive and take time to repair if entire kitchens or floors need replacing. The extent of the damage can only increase if the leak is not discovered for an extended period of time.
“After the festive season is over, brokers should check in with their clients to understand whether their sums insured are still sufficient when factoring in any new possessions,” she said. “Lastly, communication is key. It’s simple, but sending mailers and cards to clients with advice on how to prevent claims during the festive season is extremely effective. It gets them thinking about what they potentially have to lose, and serves as a timely reminder about their security arrangements.”