Canada
Ireland
As inflation and the cost-of-living crisis continue, new research1 from specialist insurer Ecclesiastical has revealed four in five (77%) brokers believe there is a problem with underinsurance in the high net worth (HNW) market, up 5% compared to the previous year2.
Interviews with 119 brokers who place business with HNW clients found that seven in 10 (68%) believe underinsurance is more of an issue for HNW clients than ever before. Underinsurance is such a prevalent issue that a quarter (25%) of brokers believe all HNW clients are underinsured, yet despite this, just 30% say their clients are concerned they may be underinsured.
Buildings (69%), jewellery (56%), contents (53%), and watches (50%) are the areas where clients are most underinsured. Followed by art (31%), antiques (29%), handbags (25%), clothes (23%), and whisky/wine collections (23%).
The top reasons why brokers think HNW clients are underinsured are a lack of awareness of the huge rise of rebuild/repair costs (79%), out-of-date valuations (78%), and lack of awareness of the value of buildings/contents (75%). Followed by inflation (66%) and clients not wanting to pay higher premiums (61%).
Amid high inflation and the cost-of-living crisis, some HNW clients are looking to cut costs by reducing their insurance cover. 15% of brokers reported clients had reduced their insurance cover during the past year, and three in 10 (27%) expect more will do so in the future.
Out-of-date valuations are a key risk for HNW clients. Three-quarters of brokers (73%) believe HNW clients have insurance based on valuations over five years old, and a quarter (24%) say clients have insurance based on valuations that are over a decade old.
It is more important than ever for brokers to speak to their HNW clients about the importance of regular valuations and setting and maintaining sums insured at the correct level to avoid the risk of underinsurance.
Rising inflation, the cost-of-living crisis, and limited supply have meant the value of luxury high-end watches, including Rolex and Patek Philippe watches, has continued to soar. Some clients may not realise their current values, and if the worst were to happen and they needed to purchase a replacement, they may find themselves significantly underinsured.
Ecclesiastical advises that HNW clients should review their sums insured annually to ensure their possessions are insured correctly. Fast-appreciating items, including jewellery and watches, should be revalued every three years, and those with more stable values, including fine art, porcelain, and antiques, every five years.
The majority (92%) of brokers are taking proactive steps to reduce the risk of underinsurance with their HNW clients including talking through the risks of being underinsured (48%), encouraging rebuild cost assessments (28%), and advising clients to obtain up to date valuations (20%) and review contents and sums insured (15%). Despite this, seven in 10 brokers say HNW clients need more support and guidance to understand the risks of underinsurance (69%).
“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. 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.”
Last year, Ecclesiastical launched an enhanced high net worth home insurance product which includes cyber damage, cybercrime, and online liability cover as standard, and optional additional covers including business cover and travel insurance.
For more information visit www.ecclesiastical.com/artandprivateclient
1 The research was commissioned by specialist insurer Ecclesiastical and conducted by FWD. 119 telephone interviews with brokers who place business for HNW / private clients between March and April 2023.
2 The research was commissioned by specialist insurer Ecclesiastical and conducted by FWD. 100 telephone interviews with brokers who place business for HNW / private clients between February and March 2022.