10-01-09 independent agent high end solutions

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The recession has taken a toll on everyonesinvestment port olios, but high net worth individu-als have been particularly hard hit in the last year.In response, a uent customers are watching theirexpenses and cutting back like the rest o the country.

When it comes to insuring the a uent, independentagents and brokers must address singular exposures inthe tens o millions o dollars, rom stolen Picassos andhorrifc kidnap and ransom schemes to a yacht runningaground in Cape Cod. But, as the current economydemonstrates, even those with higher incomes havelimits on what theyll pay to trans er their risks.

Rich people eel a lot more vulnerable these days,says Celia Santana, president o Personal Risk Manage-ment Solutions in Manhattan, New York. They thinki Lehman Brothers and Bear Stearns can collapse,anything is possible.

Santana is among the rare breed o agents whospecialize in the insurance and risk management needso people with annual premiums in excess o $10,000or assets o more than $10 millionalthough several o her clients earn that much in a year. This year she hasnoticed clients are more interested in their insurancepolicieswhat they cover and cost, and how to improveboth. So has Dan Glunt, ounder and owner o Fort PointInsurance in San Francisco. A signifcant number o theultra-a uent are asking i they have enough liabilityinsurance, he says. At the same time, theyre lookingor ways to reduce the premium by sel -insuring, takinghigher deductibles to reduce the cost.

by russ banham

Market

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46 INDePeNDeNt AGeNt n oCtoBer 2009 iam z .c m

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C a i s in a u n insu -anc ma k say i p licyn i n l v ls main s ng,d spi c n mys impac . W n s ing a mass x dus u cli nbas , says Jim isk , U.S. ma k ingmanag a C ubb P s nal Insu -anc . N a w s ing n pa c un y su ing w s an

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ab u m ving away m sp cial-iz d s vic s, says D n S ss, vicp sid n and s gm n l ad ign w and a u n p licy ld s.W v n s ing signifcan sal sinc as s in gi ns lik t xas, w ics ms b g wing m an s a s.

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against crimes like kidnap and ransom,extortion and employment practicesliabilities.

Carriers Capitalize DespiteDownturn

Absorbing the property-casualty riskso these wealthy insureds is a hand ul o carriers specializing in the market, anddespite the e ects o the recession, compe-tition is alive and well in the sector.

ACE Private Risk Services most recently joined the ranks in January 2008 a ter

acquiring the high net worth personallines insurance business o The AtlanticCompanies. The economy has made peopleexamine their spend(ing) or insurance andthe value theyre getting, which we seeas a plus or us as a new market entrant,says Wetteland.

ACE is now competing against veteransin the businessChubb Personal Insur-ance, Firemans Fund, Travelers and ChartisPrivate Client Group (American Interna-tional Groups new name or its p-c andgeneral insurance business). The insurerso er packages o insurance policies andendorsements addressing the unique risktrans er needs o high net worth individu-als, with products like Masterpiece (Chubb)and Platinum Port olio (ACE). Since thewealthy can be cleaved into sub-categorieslike new money or ultra-a uent, thepolicies within the packages are custom-tailored to each insureds particular profle.

There are subtle di erences in theo erings rom the insurers, rom cover-age limits to policy cost, but most tend toprovide similar coverages and services. Freebackground screening o new hires, like

nannies and fnancial advisers, is o eredby most o the carriers.(ACE and FiremansFund actually use the same internationalsecurity frmThe Guidry Group.) Sincethe insurers absorb the risk o a nanny orfnancial adviser causing fnancial loss, thebackground screening makes sense. Whilemost fnancial advisers are men and womeno high skill, integrity and unimpeachablecharacter, recent scams like (Bernie) Mad-o give pause or consideration among thewealthy, whose status invites greater expo-sure to such risks, explains Wetteland.

He explains the penny pinching thisway: Many a uent people have about75% o their total wealth wrapped up intheir investment port olios, which isntinsurable. The other 25%, represented bytheir homes, boats, cars and property, isinsurable. With port olios worth perhaps40% less than two years ago, more ocusis being given the insurable portion. Andthats where we come in.

Other agents servicing high net worthindividuals report similar fndings. Werefelding a lot o calls rom clients about

their renewal policies, looking or ways toamend coverages or reduce the premium,more so than Ive seen in the past, saysBrian Bettini, president o San Ra ael,Cali .-based Allen, Bettini & Carter.

Recession Breeds New RisksWhile the rich are still rich, theyre now

hesitant to pay more or some things.Santana, Bettini and Glunt acknowledgethat they are working closer with clients tostreamline insurance costs, while counsel-ing wealthy clients on how to decrease andmitigate new risks caused by the reces-sion. Wealthy people, just like the rest o us, have lost signifcant amounts in theirinvestment port olios and are suddenlyvery concerned about protecting the assetsthey have, says Claudia Wetteland, seniorvice president o ACE Private Risk Services.In a downturn they become a target orlawsuits. Even i the suits are unsubstanti-ated, they still need proper coverage.

When people lose their jobs, go througha home oreclosure and/or su er devastat-ing investment losses, theyre more apt tocommit crimes. For example, a disgruntled

nanny, gardener or chau eur let go orfnancial reasons might fnd cause to suea ormer employer or wrong ul termina-tion, discrimination or sexual harassment.More ethically-minded people in thesedi fcult times also create risks or thea uent. An average income earner mightreduce his or her auto liability limits,says Santana. Were advising our clientsto increase their uninsured/underinsuredmotorists coverage.

Shes also suggesting broader liabilityprotection at higher limits, to protect


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48 INDePeNDeNt AGeNt n oCtoBer 2009 iam z .c m

here since 1925 and have grown with thedemographics.

Mario Capobianco, president o New YorkCity-based Bed ord Insurance BrokerageInc., is closer to the typical agent servinghigh net worth individuals. Capobiancospent 13 years in broker Marsh & McLen-nans private client services group be oreincorporating Bed ord six years ago.High net worth individuals have complexpersonal insurance needs, such as multipleand oreign residences, private yachts andprivate jets, he says. A amily o fcea

private company managing the amilysinvestments and trustso ten controlsthese assets, which may be under di erententity names. The wealthy want someonein a position to provide expert counselingon risk management and insurance, whichtakes a certain amount o specialization.

In the current economy, adequatepersonal liability insurance has becomethe primary concern o the rich, the agentsays. I the house catches fre they canwrite a check or the deductible and putit back on track, but i a neighbors childis injured or abducted at their home andthey dont have enough liability insur-ance theyre not to happy writing a checkor $25 million, Capobianco says. Thisis easier said than done, however. Theliability insurance there ore needs to bestructured in such a way that all the di -erent entities are properly accounted orand covered.

Standard market products requently ailto address such complex liability expo-sures and others. Many wealthy peoplerequently volunteer their services tonon-proft boards o directors, Wette-

land explains. When these organizationsalterand theyre more vulnerable inthe current economythe directors comeunder scrutiny or potentially mismanagingthe unds. As a result, many carriers o ernon-proft directors and o fcers liabilityinsurance within their program.

Newly Rich Make Market TargetWhile many a uent people have less

money today than a year ago, others arebecoming rich or the frst time, represent-ing a signifcant opportunity or agents

to enter the business. Theyre entrepre-neurs who have fnally made it, yet theirinsurance has been with direct writerswho just dont have the expertise to servetheir needs, Santana says. The insurancecoverage needed by the wealthy is not acommodity; or a carrier like Chubb this istheir sweet spot.

Glunt says 80% o his new businesscomes rom policyholders leaving directwriters. The market share that agentsneed to capture belongs to the directwriters, he says. These carriers just dont

have the sophistication to service high networth individuals. Wealthy people needmore than an umbrella policy capped at$5 million.

How do agents solicit the business o asoon-to-be-titan? Tim OBrien, director o private client services at East Hampton,N.Y. agency, Cook, Hall & Hyde, advisesnetworking with fnancial planners,accountants, lawyers and other pro ession-als already serving the wealthy. Integrat-ing property-casualty planning into thelarger wealth management process can bevery productive, OBrien says.

Glunt also notes that 7% o his clientsactually made signifcant purchases, like

jewelry, high-end automobiles and rentalproperties, to take advantage o relativelylow prices. They have the liquidity to seethe recession as an opportunity, Gluntsays. Santana agrees: Many o our clientssee this as a great time to add to their artcollections.

Regardless o whether a client is tryingto save money or spend it, agents in themarket agree there is plenty o busi-ness to go around. Agents dont need to

cannibalize each other to build a book o high net worth individuals, says Glunt.With ACE coming into this market anda revitalized AIG in Chartis, the empha-sis should be on removing business thatshouldnt be with the direct writers. Byplacing it with specialty carriers, theclients are better served, the agencyindustry is better served and the insurersare better served. I

B h m ([email protected] ) is anIA s ni c n ibu ing w i .

The wealthy want someone in a position to provideexpert counseling on risk management and insurancwhich takes a certain amount of specialization.


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10-01-09 independent agent high end solutions

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