Working with angles to write and retain cross-border high net worth accounts
About 80 percent of Canadians live within 100 miles of the United States border. That proximity, coupled with a strong Canadian dollar and a slow-recovering U.S. real estate market, has created opportunity for growth in the high-net-worth market.
“More and more frequently, the ‘snow birds’ — retired Canadians who fly south for the winter to Florida, Colorado, or Texas — buy a second home there and contact their broker to insure it,” says Gary Hirst, National Director of Burns & Wilcox Canada.
Writing a cross-border property can be a complicated matter if a broker lacks the knowledge, experience, and available markets to service it. The broker might try to convince a Canadian insurer to take on the American residence; they might approach the surplus lines market; or they might seek out a U.S. insurance agent in the area to place the business for them. If those strategies fail, they usually have no choice but to tell the customer they can’t handle the U.S. exposure. That’s bad for business.
“Anytime you have to outsource part of your customer’s account, it’s likely you will lose all of it,” explains Bill Gatewood, Burns & Wilcox Director, Personal Lines Product and Sales. “People with cross-border second homes and other high net worth customers are looking for a broker who can handle all their exposures. You shouldn’t fragment their account if you’re truly a risk manager.”
Pitfalls of Going Solo
Many of the typical approaches retail brokers take to placing cross border business may cause problems down the road.
“Typically, a Canadian broker isn’t going to be licensed in the U.S., which creates a number of legal issues,” Hirst says. “Additionally, Canadian brokers understandably lack knowledge of U.S. markets, so judging the quality of insurance and the right amount of coverage is difficult.”
The U.S. market also presents a complex regulatory landscape, with insurance taxes required to be filed at the state level. “Filing taxes, particularly in a surplus lines placement, in various states with different processes and procedures, is something most retail brokers don’t want to deal with. But if they don’t, they have created a huge legal issue for the homeowner as well as themselves.”
State regulations impact more than insurance requirements. For instance, Canadians with residences in Florida are legally required to have an American driver’s license when they are in the state. “A lot of Canadian brokers aren’t aware of that, so they are not able to provide that insight to customers who have Florida vacation homes,” Hirst says. “A broker that does have that knowledge can provide that information, delivering added value and helping to build customer relationships.”
In addition to a different and difficult regulatory climate, the U.S. presents a much more varied environment for both weather and natural catastrophes than Canada. Whereas only British Columbia has a significant earthquake exposure, several states in the U.S. are subject to that peril. Hurricane exposures in Florida, the Gulf Coast, and Texas, and along the East Coast, need to be addressed as well.
“Canadian brokers are unfamiliar with U.S. weather exposures and their impact on the insurance marketplace in various states,” Hirst says. “We’ve seen instances where brokers placed coverage for multimillion dollar homes in Florida but didn’t secure wind coverage, which is a huge E&O exposure.”
Brokers also risk service problems when dealing with an unfamiliar insurer or specialty carrier. Claims service is a particular area of concern.
Additionally, currency issues need to be resolved when a U.S. insurer wants payment, but a broker can only accept Canadian funds.
Because going it alone can be problematic, many Canadian brokers look to partner with a U.S. agent to solve licensing, regulatory, and other process challenges. However, choosing a partner also raises new areas of concern. “It’s a matter of trust,” Gatewood says. “If you’re a risk manager in Toronto, it’s going to be very difficult to find an agent in Florida or Arizona out of the Yellow Pages who you will feel comfortable entrusting with the customer relationship you’ve worked hard to cultivate.”
“The U.S. agent may even ingratiate themselves to the client such that the Canadian broker ends up losing the primary residence,” Hirst adds.
In many cases, a Canadian broker may not be earning commission for business ceded to an American agent. And ultimately, dividing property coverage between markets creates a less than optimal piecemeal approach to risk management.
“Trying to patch together a program is not the way you want to go,” says Gatewood. “Things get missed, exposures fall through the cracks, and who’s accountable when that happens? High-net-worth customers want convenience, not excuses, when things go wrong. Having all the insurance under one risk management plan with one broker, even when multiple carriers are involved, is the way the business should be managed.”
Choosing a Partner
The best solution to service Canadian customers who have properties in other countries is to choose a partner who offers experience and expertise, one who won’t compete against a broker’s own interests. Burns & Wilcox Canada makes it easy for brokers by providing a single point of contact for a full cross-border solution that addresses regulatory compliance, servicing and claims, product and coverage, and more.
“With our network of brokers and agents across the world, we have local, trusted relationships established. We understand local jurisdictions, filing and tax requirements, and have market access to place virtually any property risk,” says Gatewood.
Burns & Wilcox is fully conversant in the laws of each state and familiar with carriers that serve the high-networth market, enabling brokers to offer the best product for the risk at hand. “The originating broker in Canada who has a customer with property outside the country doesn’t have to worry about creating an E&O exposure by going it alone,” Gatewood says. “They don’t have to worry about whether they’re asking the right questions, applying the right taxes and fees, or whether they are missing something important that they are going to discover only after the customer has had a claim and it’s too late.”
In addition to offices in Canada and the U.S., Burns & Wilcox has an office in London and can place business in Europe, the Bahamas, South America, and other countries.
“We are a significant writer of high net worth accounts across the globe,” Gatewood adds. “Being able to partner with someone who has that expertise brings a level of comfort and confidence to both brokers and clients, and it opens the door to accounts a broker might not otherwise be able to write.”
High net worth customers also have higher expectations for the service they receive, making selection of the right partner essential for brokers. It’s also important that brokers choose a partner who doesn’t interfere with the customer relationship.
“Brokers need a partner who isn’t going to try to take the business away,” Hirst says. “If a broker wants to place only U.S. exposures within the network, we can do that. If they want to place entire accounts, we can do that too.”
And since Burns & Wilcox is a single-source solution, the transaction is easy and straightforward, so brokers can retain valuable accounts and capitalize on new growth opportunity.
“Particularly in the high net worth market, customers will tend to develop more and more exposures globally over time,” Gatewood says. “If you’re a local broker and you want to maintain your customer relationship as the account grows, you have to deliver on risk management solutions for those exposures.”
“By finding a partner who can easily place coverage on a $5 million home in Canada and a vacation home in the U.S., you can keep that client in your office,” Hirst adds. “If not, the customer will find someone who can.”