Art and the private client
How can brokers make the most of the high net worth market? Eleanore Robinson speaks to the experts.
High net worth (HNW) clients wanting to insure extremely valuable goods such as art, jewellery and fine wines can pose challenges for brokers. A lack of knowledge from the client, insurer or broker can lead to underinsurance, delayed payments in the event of a claim and out-of-date advice.
With a new generation of young, wealthy clients looking to spend, continuing fluctuation in prices and even the threat of cyber attack, everyone in the market needs to be on their toes when it comes to this area.
Art and private client director at insurer Ecclesiastical, Sarah Willoughby, explained that the market is changing and there are an increasing number of younger HNW clients. She commented: “We want to work with them to reach out to young clients by talking about people we can attract through social media.”
According to Willoughby, underinsurance can be a problem both within this group and more mature clients. This is due to increases in the price of gold, silver and even wine. “There is very much an education piece to get them to know what brokers are for. Some clients have become rich very quickly. Ecclesiastical is able to provide them with insurance information. They tend to look at art, jewellery and watches,” she added.
What’s it worth?
Pushing clients to have their property valued is a key task for the HNW broker. John Sims, managing director at Vizion insurance brokers, commented: “Underinsurance is happening more so in the general market. Many intelligent, highly successful people take out a general policy.
“They do not really see the value of an insurance broker in the same way they would see an accountant. It is vitally important. You want to be a customer’s trusted advisor on their insurance.” He continued: “It is crucial for the customer and crucial for the insurer. They rely very heavily on the brokers knowing the client. It is why they pay 20 to 30 percent or more commission because the broker brings that knowledge of the client’s lifestyle.” He insisted: “One of the first questions you ask is ‘when did you last have them valued?’”
Willoughby agreed urging brokers to encourage their clients to value as often as possible. “The more regular the valuation the better. The price of gold and diamonds has increased,” she explained. “The price of high-end watches had also significantly grown in the past five to ten years as manufacturers have brought their sale back in house.”
There are many expert partners who brokers can work with on valuations. “There is a lot of good advice to be had out there. Most brokers have a panel of trusted people they go to. There are great companies out there who could not be more helpful if you tried,” Sims stated. Current market value is also not the only consideration.
Chief executive of Smith Greenfield, Steve Smith explained that advising on cover must take into account factors such as whether a piece or artwork for example has been bought for investment, personal enjoyment, as part of a collection and whether it will be for public or private display. “The public display of privately owned art will have a very different set of risk factors compared to art that is simply kept at home,” he said.
In the digital age, brokers also need to set the agenda when it comes to the risk management of fine art collections, pointed out William Cooper, managing director of Stanhope Cooper. HNW clients will typically have two to three homes in Europe and one or two homes in the US, with the greatest risk to art works occurring when in transit. Not monitoring these transit situations properly can cause the client to be insured incorrectly.
Cooper continued: “Unfortunately it seems the majority of the industry is still working from Excel spreadsheets or relying on the client, their PA or private office to update their own collection management system.
“This inertia causes delays and often dual insurance where the client is paying an inflated premium for restrictive insurance cover provided by the transit company.
“Brokers undoubtedly need to create their own system which allows them to take the initiative when it comes to protecting millions of pounds worth of art.” The broker cannot rely on the insurer or client to become more digitally-minded. It is up to them to get online and develop accurate systems across their entire proposition – not just art tracking.
Smith added: “Just as clients become more digitally savvy, so must brokers if they hope to provide a service that is both informative and valued by a client. This includes keeping an eye on auction results, working with specialist valuers and using the internet.”
He continued: “Very often brokers have information in their own client bank. If a client sells a Pechstein, for example, and it sells well then the account handler may alert another client who has one to reassess the valuation of theirs.” There is also an argument for different types of brokers to look at HNW, for example, there are opportunities for the commercial broker to offer HNW services to the CEOs they work with.
Willoughby explained: “Are they cross-selling? If they are dealing with commercial business, the directors could be high net worth clients.” She added that sales literature should include this type of insurance to promote these policies.
Brokers should also be pushing insurance companies with a history and specialism in this asset class to offer wider coverage in certain areas.
Cooper stated: “For example, until a few years ago, only two insurance companies we worked with, both synonymous with insuring fine art, indemnified their private clients if their artwork was damaged whilst in restoration.
“Stanhope Cooper has since successfully encouraged one other major player to include this cover but we are continually surprised that many providers still do not provide this vital cover.” For their part, brokers must pick out the best policies to provide cover that reflects the evolving demands and needs of the client. “It is relatively easy to ‘sell’ what the insurer has to offer which without doubt is good and is often as a result of brokers and insurers working together to bring new cover to the market,” insists Smith. “A great and relevant example of this is that some high value home policies now offer cyber cover for the home, as clients become ever more active and visible on the web and social media so their exposure has changed.”
Cyber is a new class in HNW that brokers are being forced to consider increasingly regularly. Sims agreed that brokers were having to think more about HNW tech exposure but there is more work to be done. “Cyber attacks is an area that has been a problem. The HNW market hasn’t really caught up with that.”
The possibility of a cyber attack, however, is something Ecclesiastical is working on. “We are costing that at the moment before putting something into our policies,” Willoughby stated.
Insurance Age: May 2017
IN Focus: Technology and schemes
Eleanore Robinson examines how new technology is impacting on the schemes market for brokers.
The role of technology has never been more important in business and the schemes market is no exception. Data, e-trading and social media are all powerful tools that can help grow schemes and ensure brokers stay one step ahead of the competition. But does using technology have its limits and can it, if used incorrectly, actually cause harm to a business?
Drawing parallels with the recent US election result, David Sweeney, managing director, insurance, at Brightside Group, said social media was becoming increasingly important. He said: "Generating leads through personal recommendations will always be vital for a broker but publicity, endorsements (‘likes') and comments from social media are now becoming increasingly important.
There are lessons too from politics, where social media has become a key campaigning tool. In the US Presidential race, Donald Trump bypassed a critical mainstream media to speak directly to 15m followers via his twitter feed. "In an era where customer loyalty is at a premium, especially in personal lines, creating relationships with customers is a sort of modern Holy Grail.
"Furthermore, recommendations that come through social media can reduce the lead generation cost. Trump spent far less than Hillary Clinton on advertising."
Yutree Underwriting - established less than five years ago - used social media to build its brand. Director Laura High explained: "As a new schemes business, increasing our brand profile featured heavily in our early plan.
"Technology has enabled us to do this far more quickly than we could have done 10 years ago. Twitter, Facebook and LinkedIn have all provided an unprecedented reach for our product launches, technical pieces, blog posts and press releases."
She continued: "There are pitfalls to using social media for business but, in our opinion, as long as you have a strategy, remain aware of regulatory rules, engage with followers, are consistent and maintain your brand voice and identity then social media is a vital part of promoting schemes."
High added that the next stage for Yutree would be to use technology to automate all of its scheme policy document production. This will lead to efficiencies which will enable us to focus on our underwriting, relationships and sales efforts. She said: "We do not sell our products online and our proposition is based on strong relationship management and traditional underwriting principles. "Whilst this sounds old-fashioned, it is technology that has underpinned our delivery of this proposition and, without it, we would not have achieved the success that we have to date."
Richard Brunger, schemes product manager at insurer LV said technology was playing an ever increasing role in its schemes underwriting strategy, from initial research to full scale scheme management. He said: "At LV we are always looking for brokers who are able to bring expertise to their chosen sectors, and the use of social media or electronic marketing is an excellent way to get the product to market.
"We are also finding more brokers offering full cycle selling, via website or extranet sites, which enables today's more technology-conscious client to buy their insurance 24 hours a day, seven days a week."
Simply Business built its own technology to streamline the process of developing and testing schemes, so set up can be achieved within days. At the same time, it says it can carry out the process with tailored journeys and rating models. Chief technical officer Lukas Oberhuber explained: "At every stage we take a customer-first approach, and this is reflected in our tech capabilities, which allow us to provide extremely specific products to a wide range of customers through mass customisation, while keeping the cost of managing the schemes under control. "Technology helps us to build successful schemes because it helps us know our customers."
He continued: "We are constantly looking at a huge and ever-growing range of data points, and through these, along with real-life interactions through our contact centre, we can build a picture of our customers and prospects that enables us to build schemes that cater for the extraordinary diversity of the UK's small businesses. "We're well on our way to becoming a truly data-driven company, helped in part by our in-house analysis system AERIE, which has had a major and quantifiable impact on the business through significant increases in monthly written premiums, better reporting to partners, and improved insight for our insurance teams."
From an insurers point of view, increased technology gives LV the ability to undertake improved due diligence on new opportunities, Brunger added. This means it can be more confident on a book of business from the outset and, therefore, hopefully not have any future surprises. It also enables LV to accurately map weather issues - one of the industries major challenges - much more effectively.
Brunger said: "Technological improvements in full cycle management of schemes can allow the broker's system to liaise directly with the insurer's system. "This negates the need for bordereau submission in some cases and can provide the ability to automatically provide risk data without manual intervention. This allows us, as underwriting businesses, to highlight potential problems earlier and solve them faster."
Brightside's Sweeney argued that relationship management now extends well beyond online purchase alone, with customers expecting not only to buy online but to be given great advice too, so the provision of advice will increasingly transition from the telephone to the internet. He said: "Client portals, where customers can store their documentation, ask for advice and track their claims are now ‘de rigeur.' The next step is for apps to be developed that allow mobile access to this information. "But with advantages come potential pitfalls, such as the risk of innocent non-disclosure if the information is not completely clear."
Sweeney added: "For sure, traditional telephone brokers will continue to play their part as there will always be customers who prefer to speak to someone than buy online. "In Brightside's experience, higher value clients are more likely to use a call centre as they want to talk to someone who understands their risks."
Oberhuber, however, said the most significant potential pitfall, would be a lack of buy-in when investing in technology. He said: "All too often, tech is looked at as a cost, rather than an investment. In order to make it work, you need the best people - and if you don't have those people, you're not going to get your return."