How agents can meet the affluents’ expectation of a luxury experience

Luxury used to be associated with a price, a label on a product and acquiring expensive items. Today, luxury is about service. The experience is defined by services that make the consumer feel pampered and unique. The more exclusive the service, the greater the experience.

Leading the charge in providing that type of experience is the financial services industry. Financial planners, wealth managers, private bankers and family offices provide wealthy consumers a level of financial planning and investment management not readily attainable by the mass population.

How can insurance companies, agents and brokers cash in on the trend in affluence and capture this desired segment of the population?

The answer is simple: Provide a concierge quality interaction at every touch point of the insurance transaction, and offer products and services that meet the complex risk exposures that go along with affluence.

Every insurance discussion should be based on risk management in the broadest definition of the term. This is not a typical insurance review where an agent “analyzes” the existing declaration pages and offers a “similar but different” insurance package. This risk management starts with a complete understanding of the prospect’s lifestyle and life stage. It starts in the same place where a good financial planner begins. Only then can an insurance agent offer the most appropriate risk mitigating solutions.

In most cases. this solution should be a balanced package of: risk prevention tips; risk mitigating and resolution services; and risk transfer (insurance) products.

Teamed with the right insurance carrier, an agent or broker can confidently offer a unique service for the affluent that will take the insurance transaction from drudgery to a true “luxury experience.”

How many consumers:

• Get real help in evaluating their property value to ensure enough property coverage?
• Get a chance to discuss their lifestyle with professional security consultants to determine their family’s susceptibility to risks such as home invasion, kidnapping or identity theft?
• Get legal consultation on hiring and managing household employees or serving on not-for-profit boards?
• Receive up-to-the minute warnings about travel destinations and travel risks?

It takes that level of risk evaluation and mitigating services to satisfy today’s affluent consumer, who is much more aware and discriminating. To meet the risk exposure needs of the affluent, agents and carriers must be able to offer insurance products that meet the range of their uniqueness and complexity. Following are some of those products.

Property
Luxurious possessions warrant specialized coverages and higher limits not afforded by standard insurance policies.

Custom and historic homes with intricate designs, superior craftsmanship and expensive building materials can be difficult and costly to repair or replace. A surge in construction costs or materials can leave homeowners with large coverage gaps. An extended replacement cost policy can provide an unlimited amount of coverage beyond the policy limits. Additional living expense coverage should enable clients to reside in a home of similar stature while their permanent residence is being rebuilt.

Flood insurance available through the National Flood Insurance Program can be inadequate for homes with replacement costs in excess of $250,000, the program’s maximum limit. New flood products from private insurers provide both higher limits and broader coverage, including for finished basements.

Condo and co-op owners often do not realize that their association’s insurance policy may not cover the full cost of damage to common areas. New all-risk policies can provide limits for assessments as high as $100,000, as well as for additions and alterations inside the unit.

Expensive artwork often is best protected by itemized coverage that considers appreciation in value. If the pre-loss market value of an item is greater than the itemized coverage amount, the policy could pay as much as 150 percent of that. For glass and sculptural works, breakage protection also should be considered.

When a new car or yacht is driven off the dealer’s lot, its market value begins to depreciate. Agreed value policies can provide coverage up to the purchase price with no deductible and no depreciation.

Liability
A slip on a poolside tile, inappropriate words from a guest to a housekeeper, or one wrong decision made on a volunteer board can cost millions of dollars. In addition to excess liability coverage with high limits commensurate with the clients’ wealth, new coverages provide financial protection in areas of expanded risk.

Employing household help or yacht crews can expose a client to an employment practices lawsuit. Allegations of employment discrimination, sexual harassment and wrongful termination can lead to huge jury awards and damage a client’s reputation. Domestic employment practices liability insurance can cover jury awards or settlements, legal fees and public relations expenses to minimize reputational damage.

Service on a private company or not-for-profit board can put a client’s personal assets at risk. While public companies often indemnify board members, private companies and not-for-profits may not. If a board doesn’t indemnify its members or its insurance limits are exhausted, board members may be required to forfeit personal assets. Independent directors and officers liability policies can cover multiple directorships and gaps in other D&O policies.

Family
When a client’s family is victimized by a violent crime like burglary, stolen property is not the only thing taken. While no insurance can undo the emotional pain, agents and brokers can help minimize the financial complications.

Home invasion, stalking and child abduction are traumatic. Victims may need to take time off from work, seek psychiatric counseling, upgrade home security systems and even temporarily relocate their residence. New insurance products address those expenses and others not covered adequately, if at all, under health and homeowner policies.

Vacations and business travel to exotic and other locations can place clients in jeopardy, especially when personal safety is the last thing on their minds. If a client suffers a medical emergency in a remote location, evacuation could cost tens of thousands of dollars. New travel accident policies cover all family members during all trips within an annual policy period. They cover transportation to Western medical facilities, and can assure that patients will not be turned away by foreign medical institutions that require immediate payment for services.

Combined with a luxury service experience, these new and enhanced insurance products will help to satisfy the needs and desires of high-net-worth and other affluent consumers. The agents and brokers who provide this full luxury experience will possess a distinctive competitive edge in a rapidly expanding affluent marketplace.

Eric Pruss is a senior vice president of Chubb & Son and strategic marketing officer for Chubb Personal Insurance.

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