Does your agency have a book of high net-worth personal lines business? Eyeing this segment as a potential growth opportunity in 2019, but not sure where to start?
As the threat of directs and disruptors weighs heavy on standard personal lines, high net-worth insurance is a becoming a more attractive niche for independent agents. Here are six ways to make sure you’re going after this business as effectively as possible:
1) Know your carriers. The consolidation of Chubb, ACE and Fireman’s Fund several years ago opened the door for new entrants to make a play for high net-worth business. But with 2017-2018 delivering record-level catastrophes around the U.S., it’s a “dangerous time” for the personal lines market, says Jerry Hourihan, president, AIG Private Client Group.
“It’s incredibly important for agents to understand who they’re partnering with, what products they’re providing for the clients, and not just the coverage or the price, but what actually is going to happen if something bad happens—how the claims experience is going to work and what kinds of resources the company is going to have to respond,” Hourihan says.
In order to navigate the competitive landscape, Todd Rockefeller, principal of Private Client Services for BNC Insurance & Risk Advisors in Rye Brook, New York, adheres to a tight agenda when he sits down with a new high net-worth client.
“They want to know, ‘Who are these companies? What do I need to know about them? Why are the prices different?’ We talk about the coverage offerings—maybe one’s better in this than that. If you have a second home on Martha’s Vineyard or in Florida or Maine, we have to align you with a company that’s going to have the resources and the appetite to do that,” Rockefeller points out. “You have to have the right basket of companies to meet all those needs.”
The conversation also involves highlighting the high net-worth carriers Rockefeller believes are the “gold standard,” as well as which capital structures might appeal most to a specific client—and that certain companies that have only been in the space for a few years may not be able to maintain their low rates in the long-term.
“What we’re doing is we’re showing the breadth of the market,” Rockefeller explains. “We say, ‘Hey, if you like the tried and true, you might pay a little more for it. If you want to go with something that’s really cost-efficient, I can’t guarantee it’ll stay there, but it’s a good place to be today. If you want something up the middle, here’s a company that’s been around for a decade or so, and they seem to align their philosophy with their clients.’ It’s nothing new—it’s just giving options.”
2) Network smarter. Mark Galante, president of field operations at PURE, says one of the most effective ways to prospect for high net-worth business is building a network among other professionals who serve affluent clientele.
“That could be folks in the wealth management community—private bankers, family offices, accountants—or it could be realtors and property managers,” Galante says. “You really want to build that network and showcase expertise with those folks so that when they’ve got a client they know is going to need insurance, they immediately think of you.”
“When agents associate themselves with centers of influence like wealth advisers, private bankers, any sort of adviser who already has a trusted relationship with a high net-worth client, they can not only position themselves as an additional trusted adviser in that relationship, but actually position p-c insurance as part of a wealth management plan—not an afterthought,” agrees Ron Fiamma, global head of private collections, AIG Private Client Group. “We find that most times it is an afterthought, but you really shouldn’t be planning a client’s equity portfolio if you don’t know whether they carry enough umbrella insurance.”
3) Nurture your personal lines staff. Will Van Den Heuvel, senior vice president, personal lines, The Cincinnati Insurance Companies, observes that many agencies don’t invest as much in recruitment, hiring and training practices for personal lines as they do for commercial lines.
“We’d like to see more folks investing in talent—keeping really good people that know how to develop and write high net-worth personal lines, and then keeping them in high net-worth personal lines, not moving them to other parts of the agency,” Van Den Heuvel explains. “At a lot of agencies, personal lines is the training ground for commercial. But if you’re dealing with sophisticated clients, you need to have sophisticated people who understand the exposures of servicing and selling to them.”
A crucial part of that focus, Van Den Heuvel says, is developing “a process by which you’re going to segment your service and sales capabilities. How is it going to be different from your middle-market business? What are you going to do to manage those referral sources, and what are you going to do differently to retain that business? This is not a line where you can just do some quick advertising and write a lot of business.”
Lisa Lindsay, executive director, trustee and founding member of the Private Risk Management Association, encourages agencies that are serious about high net-worth personal lines to focus heavily on professional certifications and continuing education for their employees. “Agents who really want to make a difference in helping people live successful lives need to invest in their own education by making sure they’re up to date on the coverages that are available, as well as the emerging trends and risks that are out there,” she says. “They’ve got to invest in their knowledge about what’s going on in the marketplace.”
4) Treat it like commercial. On a similar note, according to Lindsay, the agents and brokers who are most successful with high net-worth clients are the ones who are able to change the insurance conversation “to look at private risk management in the same way a corporation looks at risk management. What can we do to educate and help clients not have a loss or minimize the loss, and if they do have a loss, make sure they’ve got the best insurance program in place?”
Rockefeller, who spent the early part of his career in commercial underwriting, agrees that these days, high net-worth clients have more in common with small commercial accounts than with mainstream personal lines clients.
“If you have an expertise in commercial insurance, you can take a stab at this market,” Rockefeller says. “When you think about workers compensation, crime, cyber, employment practices liability, liability, auto, property, flood—the risks of a high net-worth insured are the same as those of a business. It’s just a different conversation and a different expectation.”
5) Modernize your operation. Although much of the high net-worth personal lines market consists of individuals in their 50s-60s, Rockefeller says to keep an eye out for new money—not just millennials with inheritances, but young entrepreneurs and business owners who have enjoyed early success.
“They may want more of a digital experience, a concierge-type experience, quick contact options—something more nimble,” Rockefeller explains. “We see a lot of younger affluent families that like to research the internet. They come to the phone call engaged and knowledgeable, and that traditional brand name is just not going to impress them as much. Old money may think differently, but the newer generation, not so much.”
Self-service and mobile capabilities are in much higher demand for this segment of the demographic, says Rockefeller, whose agency has enjoyed greater close ratios thanks to offering tech-savvy options like e-signature: “If you can give them the ability to transact on their smartphone, they’re going to do it. If they can get texts notifying them of late payments and then a solution to make payment right then, they’ll do it, and that helps us too.”
6) Get off the price tag. Just because a client is affluent doesn’t mean they don’t want the best value for their dollar. “They may be less concerned about the price, but they want to make sure they’re not overpaying for things they don’t need,” Rockefeller says. “You could have someone paying $50,000 a year and tell them, ‘I don’t think you need this physical damage coverage on this car,’ and they’re thrilled that you’ve saved them $200 because they know you’re paying attention.”
It’s less about the number, then, and more about the service that accompanies it. “They’re thinking, ‘Listen, I know I’m paying for something, and I can—I just want to be sure you’re doing your job, bringing me new ideas constantly and asking me the right questions,’” Rockefeller says. “‘Price always matters, but if it’s a few thousand this way or that way, that’s fine, as long as I feel like I’m getting a fair shake.’”
“These are smart, sophisticated consumers,” Galante agrees. “What’s most important to them is that you put their interests above everything else. If you obsess over doing what’s right for that policyholder, you’re going to win.”
Jacquelyn Connelly is IA senior editor.