A Risk Manager’s View on High Net Worth Insurance Programs

How to Develop the Complete Program for High Income, High Profile Clients

Designing an insurance program for the high income, high profile client will start with the process of an analysis of all of the known risk pertaining to the client’s assets, occupation and financial well-being.

Similar to an audit procedure, begin by determining a client’s potential exposures to protect against financial loss. This would include the companies they own and their operations, asset protection, professional acts and personal obligations. Then design an insurance program that provides coverage for replacement cost protection on real property, legal defense response and high enough limits to protect potential claims that are based on a client’s worth and perceived notoriety. Insurance policies are intended for the catastrophic loss, providing assistance to an insured, to bring them back to the whole position they had prior to the loss.

Begin the organization process by requesting current schedules of insurance from all of the insurance brokers associated with the client. Work with the client’s financial team and discuss all of the potential exposures and concerns. When evaluating life insurance, listen carefully and assist to design a life insurance program that is planned with the client’s personal intent and estate tax consequences. Disability insurance is as important as any insurance for salary and lifestyle stream of income to continue in the event of an illness or accident.

Liability Coverage

Liability insurance is one of the most important insurances that a client maintains. Liability insurance is intended to protect against a financial exposure such as a lawsuit, the legal fees to defend and possible awards. Many times a client is cleared of any wrong doing but has incurred high legal fees. There are personal and commercial liability policies to consider. If available, request that legal defense cost be reimbursed outside or separate from the limit on the policy. The exercise to determine a limit includes: researching the marketplace for similar insured’s in size and profile, potential exposures and premium cost considerations.

The limit of umbrellas liability is determined by analyzing the potential of a lawsuit and the value of the client’s financial assets to protect. An important step of the review process is to verify that primary or underlying limits meet the umbrella requirements to avoid a gap in coverage.

Typically, a high profile client such as a well-known band would be writing their songs for a year, rehearsing, recording and then out on tour. The liability exposure or potential for a claim is similar for both the club band and the arena band. The financial assets may differ for each client, but the size of a claims is still unknown and the potential for a catastrophic financial loss exists. Non-appearance, travel accident and numerous other insurances need to be considered to complete the insurance program.

Exclusions

It is just as important to recognize exclusions as it is coverage provisions in an insurance policy.

Professional liability insurance is a separate policy and is designed from the client’s specific business operations within their profession. All other insurance policies exclude professional actions and the cost to defend. Although professional insurance can be expensive, it is the only policy that provides the defense coverage for a lawsuit pertaining to the client’s professional actions. Higher deductibles are standard to offset the costs.

In summary, risk management of an insurance program is an important part of protecting the high income, high profile client. Working with financial professionals such as business managers, accountants, estate attorneys, legal and financial representatives along with insurance brokers that specialize in this type of clientele, are essential to everyone’s achievement in taking care of the client. The success of servicing and protecting a client depends on the teamwork and communication from all of the client representatives.

Topics Risk Management