More than 2 million homes in the United States are worth more than $1,000,000, and that number has doubled in four years’ time1. As the affluent market rebounds from a record setting catastrophe year in 2017, it is more important than ever to discuss the “state of the market” with your clients.
High-Value Homeowners Insurance policies can be intricate, requiring Insurance Market Source to tap into its network of experts for their specialty insurance knowledge. To shed light on this topic, we connected with Heather M. Posner, Director, High-Net-Worth Insurance, Burns & Wilcox, Los Angeles, and Don Malcolm, Underwriting Director, Personal Insurance, Burns & Wilcox, Atlanta.
Q: What changes are occurring in the High-Value Homeowners Insurance marketplace?
A: Heather Posner (HP): Due to the intense catastrophe season last year, we are seeing rates increasing across the board in Personal Insurance, not just in coastal areas. When carriers become less profitable they either increase rates, restrict appetite, or do both. Most brokers and agents have at least a few high-value clients in their book of business, and with changes in the market occurring, it is imperative that brokers prepare them. The worst situation that could occur would be if the High-Value Homeowners policy renewal arrives in the mail, taking the insured by surprise with no communication from the broker. Being prepared and discussing market changes early and often, shows a broker’s client that they are an adviser that is working to advocate for them.
Q: What can brokers and agents do to be better advisers for their clients?
A: Don Malcolm (DM): Brokers and agents can become a trusted adviser to their High-Value Homeowners clientele through bringing insights, education, and actions to them without being asked. When rates begin to rise, some clients may quickly want to move on to the next carrier. However, finding a lower premium may equate to less coverage. Before this conversation begins, brokers can examine how market changes may affect their program. If it’s a small change, staying with the carrier may be right. If there is a drastic difference, change may be needed. Clients in the high-net-worth category can be met with on a regular basis, but do not take them for granted. This is where a broker can act as a concierge of sorts. Set a precedence of at least twice per year to spend time and show them what each product does in their insurance portfolio. This will strengthen the relationship, elevating the broker to a higher status in the client’s eyes. Similarly, brokers should regularly seek advice from their wholesale insurance partners for reassurance on product offerings and details on market changes.
Q: As more people invest in goods rather than the traditional stock market, have more high-net-worth individuals been looking for additional contents coverage?
DM: Contents of the home should always be discussed when placing a High-Value Homeowners Insurance policy. Recently, one broker’s client had an Andy Warhol painting tucked away in their closet because they were tired of seeing it on the wall. A million-dollar piece of artwork like this should be appraised and included in a Collections policy. Additionally, over the past few years, we have seen growth in all types of collections. In addition to art, we have seen a growing investment in sports memorabilia, firearms and antiques. Clients will often forget to mention these items to their insurance professional, which is why it is important for agents and brokers to ask the questions.
With the advent of social media, there have been noticeable changes in buying patterns over the last five to 10 years. Purchasing new cars, gadgets, watches, and the like, has become more impulsive from our experience. This is why it is important to be in touch with the client and educate them on purchases made that they should inform you of.
HP: One area that is drastically underinsured in many high-value homes is wine. Many people – clients and brokers alike – do not realize that wine collections can be insured. These collections often reach large values and are steadily increasing over time. Brokers should always inquire further about collections, as large-value items may not be immediately recognized by policyholders, including watches, guitars, and antique furniture. Additionally, it does not need to be a collection to be insured; single items can be covered as well if the value is there.
Brokers and agents should take the time with high-net-worth clients to ask questions, provide policy insight, and discuss how insurance industry changes affect them. This will continue to be important as the amount of million dollar homes increases, putting more potential new leads in this high-value category. Clients with High-Value Homeowners policies generally appreciate trusted advisers more than a person with whom they have a yearly transaction.
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