The communities in the Northeast most gravely affected by Superstorm Sandy include some of the wealthiest towns in the nation: For practically every bungalow destroyed by the storm surge, a million-dollar beachfront mansion was also claimed.
Yet for all their means and money smarts, many of these well-to-do individuals were largely underinsured—and now they are paying the price, as they’re finding out the coverage they had won’t fully pay for all of the damages incurred.
Agents and brokers have long been aware that the high-net-worth (HNW) demographic remains largely underserved by the insurance industry. Up to 60 percent of individuals who would qualify for a policy with an HNW insurance carrier remain with a standard insurer.
However, several carrier executives say, the devastation wrought by Sandy presents an ideal teaching moment for illustrating the value of HNW coverage—and getting the wealthy to make the switch to a specialized carrier.
“This is a tremendous opportunity to talk about High-Net-Worth solutions,” says Jerry Hourihan, senior vice president of AIG’s Private Client Group. “Independent agents can promote the products and services. We plan to do some direct marketing as well.”
Ross Buchmueller, CEO of Privilege Underwriters Reciprocal Exchange (PURE), says Sandy provides some striking examples of the different post-storm experiences of the “haves” (those with HNW coverage) and the “have-nots” (those who still rely on traditional coverage to insure their assets).
“We and carriers like us have been trying to describe the differences between these two levels of coverage, and we’ve been making progress,” Buchmueller says.
But post-Sandy, he points out, “people are going to talk to their neighbors, and policyholders with a High-Net-Worth carrier are more likely to tell a much better story.”
Indeed, HNW carriers, in their response to Sandy, say they believe they are making the sort of impressions that will result in some epiphanies among potential policyholders when they hear from wealthy friends about the level of service delivered and the amount and type of coverages offered.
PLATINUM-CLASS SERVICE & COVERAGE
One point of service differentiation is in the area of speed.
For example, Jim Fiske, vice president and U.S. marketing manager for Chubb Personal Insurance, notes that the adjustment process was initiated on more than 90 percent of Chubb’s HNW claims within the first eight hours after Sandy subsided.
And when it comes to terms and conditions, HNW policies often have no “holdback” provisions, thereby allowing for full replacement costs, including building-code upgrades.
“Many times you have these stately, older mansions, and when you rebuild, you have to adhere to [modern] codes,” says Donald Soss, vice president in charge of the private-wealth group at Fireman’s Fund.
And because it can take a very long time for these mansions to be rebuilt, Fireman’s Fund has no limitations on providing living expenses for the client in the interim, whereas the standard market does.
“Sandy might bring to the forefront hundreds if not thousands of cases in which High-Net-Worth [insurers] responded better than standard carriers,” says Buchmueller. HNW carriers, he adds, can “build upon this to better articulate the value of being with a specialist.”
“We can separate ourselves with the exquisite focus we have to get all the little things right,” says Fiske, who adds that HNW providers have had very low complaint ratios since Sandy, according to the New York Department of Financial Services.