At a time when personal lines faces the threat of commoditization from companies that teach consumers low prices are all that matters, high net-worth insurance has big appeal for independent agents who want to hang on tight to their market share.
But thanks to the widespread appeal of this niche, independents aren’t the only ones vying for the business. Call it the “get rich, never switch” mentality: If an insured starts out small with a captive carrier, it might not occur to them to shop for a new agent or company as they continue accumulating assets and developing more specific needs.
“There’s a significant portion of the population that maybe went with a certain company, and they just don’t know what they don’t know,” says Will Van Den Heuvel, senior vice president of personal lines at Cincinnati Insurance. “They don’t know the options out there—that there are better ways to provide coverage, and that they don’t need to self-insure or underinsure portions of their risk. For a lot of customers, the whole independent agency system and the carriers that play in that space are kind of a mystery.”
Most consumers don’t realize agents who specialize in insurance for wealthy individuals even exist, “so they don’t go out and they don’t look,” says Lisa Lindsay, executive director, trustee and founding member of the Private Risk Management Association, an independent association committed to the promotion and advancement of the high net-worth insurance industry. “And if they talk to their [captive] agent and say they’d like more than $5 million in excess liability, and the [captive] agent says it’s not available, they go, ‘Oh, OK, it’s not available.’ But it is available. People have $20 million worth of coverage.”
“Wealthy people typically overpay to underinsure,” agrees Ross Buchmueller, CEO of the PURE Group. In the high net-worth space, “the basic thesis is that deductibles are too low and liability limits are not high enough.”
Scott Gunter, COO of Chubb Personal Risk Services North America, says these coverage nuances are crucial for high net-worth clients—but so are the services. “There are a lot of customers insured with the direct writers or mass markets that we think are being underserved given the amount of assets they have.”
It’s on you to prove your value proposition and “drive the message home that there is a different way—that there is choice and flexibility and capacity and great service and value for sophisticated customers,” Van Den Heuvel says. “We all need to continue to invest in that messaging and that branding.”
Sky’s the Limit
For agents who are interested in playing in the high net-worth space, “the opportunity is significant because the demographic is growing,” Buchmueller says. “We can debate about who’s with State Farm vs. AIG, but there’s no debate that this category is growing at a much, much faster rate than the rest of the economy.”
Many personal lines agents have already figured out that this is a market worth entering. “The interest level in building high net-worth practices among brokers is at an all-time high,” observes Jerry Hourihan, president of AIG's Private Client Group. “It’s a great opportunity for brokers to build some expertise, and there’s a ton of head room for growth.”
“High net-worth personal lines is a growing, profitable space for agencies,” Van Den Heuvel agrees. “As a result of that, we’ve found a lot of interest from a lot of these larger brokers around the country to invest in high net-worth, to hire more producers, to figure out how to cross-sell more effectively, to tap their centers of influence and to continue to grow that space.”
Lindsay points out that the ins and outs of high net-worth personal lines make it similar to commercial insurance—which means it’s an attractive segment for agents who may not get as big a thrill from selling and servicing more run-of-the-mill auto and homeowners accounts.
“This particular market is a great career opportunity—it’s just as complex as the commercial insurance side,” Lindsay says. “It’s very rewarding. You have the ability to develop not only the technical expertise from the insurance side, but also some amazing skills because you’re dealing with high net-worth individuals, trusted advisers and financial planners, so you have access to a lot of iconic leaders and unique experiences.”
And the higher premiums don’t hurt, either. “If an agent or broker wants to get into this space, it’s fantastic,” Lindsay adds. “The clients are great—they’re sticky, they’re loyal and they’re by and large very profitable. But it takes commitment. You can’t just dip your toe in the water.”
What to Remember
Selling high net-worth personal lines isn’t just a hobby—it requires serious commitment from your agency. “You can’t just work on a high net-worth client and then go back and do something else the other four days of the week,” Lindsay says. “When that client calls and says they have a yacht or they have fast car that’s going to be in a race, you have to be able to help them. If you’re not doing it with commitment, then you’re not going to be able to do that.”
Consider the client who’s starting a new art collection—they may not know the ins and outs of proper caretaking. “Are you storing the art properly, out of the sunlight and at the right temperature?” Gunter points out.
Or when you sit down and talk with a high net-worth client about their lifestyle, you might learn that they sit on a nonprofit board. “Now you’re talking to them about their personal directors & officers exposure,” Lindsay says. “Or maybe you find out they charter boats when they’re down in the Caribbean every year, or that they host a charity event at their house once a year, which brings in all sorts of liquor liability exposures. But you will never get that information unless you sit down and seek to understand, because people aren’t wired to think the way that we in the specialty are wired to think.”
“It’s not as simple as just hanging your shingle out,” Hourihan agrees. “You’ve got to have a fair amount of expertise, you’ve got to have relationships in the right communities and you’ve got to have the right carrier relationships in order to deliver what these clients need.”
Relationships are incredibly important in the high net-worth space, and not just with your clients and carriers. In addition to talking to customers about their unique lifestyles in order to understand exactly what kind of tailored coverage they need, Gunter suggests working with all the other advisers a high net-worth client has in their contact list.
“You have to be able to speak to the customer, and it’s hard because insurance isn’t usually the first thing they’re thinking about—it’s usually down the list of priorities,” Gunter points out. “So the interesting part for the independent agents is getting in with other advisers who are helping these individuals, whether it’s their wealth adviser or another trusted adviser, and saying, ‘It’s not just about how you invest their assets—it’s about how you protect their assets.’”
For example, many high net-worth clients look at their insurance from “a family standpoint,” Gunter says. “They set up family trusts, they set up LLCs or similar financial vehicles, and those bring different liability exposures that agents have to make sure they address. The best time to have that conversation is when those trusts are being set up.”
“Agents need to make sure they have partnerships with the right suite of carriers and service providers, whether it’s appraisers, remediation companies or someone else,” Lindsay agrees. “It’s incumbent upon agents to always make sure they have knowledge of and access to the right relationships to meet the needs of their clients, and that they’re communicating regularly with their partners about what needs they’re seeing, what lifestyle trends are out there and what concerns the clients have.”
Jacquelyn Connelly is IA senior editor.