Most wealthy individuals and families who insure their assets with carriers geared primarily for the average U.S. household overpay for coverage that leaves their wealth unnecessarily exposed to the risk of severe financial loss, according to an ACE survey of independent insurance agents. High net worth (HNW) families often do not carry enough liability coverage in a variety of forms. Too often, their homes and collections of jewelry, art, wine and other precious items are not adequately protected. Meanwhile, these families also overlook many savings opportunities, such as higher deductibles and package discounts. By taking advantage of these savings opportunities and strengthening coverage against severe loss, HNW families can often achieve more effective protection without a significant increase in premiums.
These findings are presented in a new whitepaper released today by ACE Private Risk Services, the high net worth personal insurance business of the ACE Group. The study, Wealth at Risk: How High Net Worth Families Overpay to Be Underinsured, surveyed more than 600 independent insurance agents and brokers about their new HNW clients previously insured by a mass-market carrier. The full research whitepaper can be found here. The study includes comparisons to 2010, when a similar survey was conducted, and shows that the problem of overpaying and underinsuring has worsened.
"Financially successful families and individuals often fail to adjust their personal insurance programs as they build wealth," said Robert Courtemanche, Division President, ACE Private Risk Services. "Unless they have a severe loss, they never realize their agent and carrier no longer have the expertise, insurance coverages, and services to fully meet their needs. But by then, it's too late. Ironically, if they had looked for an agent and carrier better suited to their current level of achievement and lifestyle, they probably wouldn't have had to pay much more for better protection. In many cases, they could have paid less."
Compared to 2010, more agents reported that families insured by mass-market carriers were likely paying for unneeded coverage, and missing a variety of savings opportunities. The most common missed savings opportunities include:
- Increasing Deductible Amounts: 81 percent of agents report families have homeowners and auto insurance deductibles that are too low.
- Package Discounts: 62 percent say families do not take full advantage of discounts earned by placing multiple policies with one carrier.
- Loss Prevention Credits: Half of agents surveyed believe that families overlook credits available for safety systems such as burglar alarms, water leak detection and power backup systems.
More agents in 2012 also reported that HNW clients insured by mass-market carriers were likely to be underinsured for a wide variety of risks, many of them serious. The most commonly underinsured risks include:
- Umbrella Liability: 92 percent of agents report inadequate liability coverage, despite four in five families believing their wealth alone makes them an attractive target for a lawsuit.
- Uninsured/underinsured Liability: 86 percent say HNW families have inadequate protection if they suffer serious injury or damage at the hands of someone else who lacks the insurance or assets to meet his or her liability obligations.
- Valuable Collections: 86 percent of agents report ineffective coverage of jewelry, art, wine and other valuable collections.
- Home Structure: 83 percent believe families have insufficient coverage of the main home and/or vacation home, even as the home structure often represents the largest component of a family's net worth.
"After the record number of disasters in 2011 and many notable wildfires and storms in 2012, we're hoping HNW families find new motivation to review their risks regularly," said Mr. Courtemanche. "An experienced independent agent or broker should be able to make the process easy and illuminating, and match them with a carrier that has the breadth of coverage and service offerings to meet their needs. Many clients who follow this path report that they finally understand what they are buying, and can feel more confident in protecting their family and the lifestyle they have worked hard to achieve."
About ACE Private Risk Services
ACE Private Risk Services is the ACE Group's high-net-worth personal insurance business, which provides specialty coverage for homeowners, automobile, recreational marine, umbrella liability and valuable collections insurance for individuals and families with emerging and established wealth. Policies are issued by Bankers Standard Insurance Co. and ACE Insurance Co. of the Midwest. Additional information can be found at: www.aceprs.com. The ACE Group is one of the world's largest multiline property and casualty insurers. With operations in 53 countries, ACE provides commercial and personal property and casualty insurance, personal accident supplemental health insurance, reinsurance, and life insurance to a diverse group of clients. ACE Limited, the parent company of the ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 index. Additional information can be found at: www.acegroup.com.