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Got an expensive hobby? Perhaps you’re on the hunt for a Jackie Robinson rookie baseball card or an elusive bottle of vintage Bordeaux. Maybe you are keen to add a ski chalet to your portfolio of properties, or, quite possibly, a yacht. However obscure your posh pastime, chances are there is a special insurance policy to cover it.
The number of high-net-worth individuals in the US has grown considerably in recent years, which has created a big market for special- ised insurance lines to protect the holiday homes, sports cars, jewellery, art collections and other toys of the super-rich.
“The fact that there are more wealthy individuals in this country is actually very good for us,” says Don Soss, senior director of high-net-worth personal insurance at Fireman’s Fund, a division of Allianz. “We’ve been in the affluent market since 1980.” Today, the company’s high-net-worth customer – with home, vehicle and excess liability coverage – pays an average annual premium of $45,000.
In addition to Fireman’s Fund, there are several insurers that target high-net worth households, including Chubb and Atlantic Mutual Insurance. None of these companies has a minimum net worth requirement, but they all say that it is a self-selected group that buys their high-end lines.
Policies that cover special collections are widely held among high-net worth clients, according to Frances O’Brien, chief underwriting officer of Chubb personal insurance, which last year wrote $3.5bn in premiums. O’Brien says that, since the company began focusing on the very rich in the late 1970s, it has been especially attuned to how the needs of wealthy collectors have changed over the years.
“Some of the things we’ve seen over time is that the world is getting smaller: people travel more and collect from more different places and they have significantly different collections,” she says. “It used to be that people just collected paintings or sculptures, but nowadays we have collectors who work in rare physics books or duck decoys or gas station memorabilia.”
Not all clients are as concerned as they should be about insuring their precious collections. “There’s a spectrum,” says Theresa Lawless, fine arts and collectibles manager at Firemen’s Fund insurance company. “You have different kinds of collectors – some are very passionate about the art they collect and most of that excitement comes from the hunt and the acquisition, and so they are not necessarily thinking about how to care for and protect the art.
“Then you have the serious collectors who are thinking about preserving their collection for posterity; and then there are the ones who recognise their collections are good investments.”
In addition to insurance, companies have enhanced the auxiliary services they offer to high-end collectors. Mainly these services are offered via independent vendors. For instance, Fireman’s Fund has an in-house staff of experts that evaluates homes for risk management issues pertaining to their collections. The staff consults on matters such as how a client should preserve his/her valuable pieces, and where a client ought to place his/her objects (hint: not over a fireplace or a heat register, or in a high-traffic hallway).
Fireman’s Fund also offers a dedicated service for wine collectors. The company maintains a barcoded catalogue of the client’s collection, complete with recommended drink dates for each bottle. It also offers a service to help clients make sure valuations on their fine art collections are up to date and helps with schedule reviews and digital documentation.
Meanwhile, Chubb, which insures more than half of the chief executives of the Fortune 500, offers clients who have their pilot’s licences access to insurance through Global Aerospace, which provides worldwide coverage for the ownership, operation and maintenance of aircraft.
It also offers services to clients who operate yachts. “We have many clients who operate large boats and do worldwide navigation,” says O’Brien. “We have a service to help them find suitable routes, help them understand risks of piracy and make sure that their boat is secure. The goal is to help them navigate the trip so that it is a pleasure, and so that it goes the way they want it to go.”
Exclusive services are not just for collectors. Fireman’s Fund offers clients background checks on cooks, nannies, drivers, and other household staffers, while Chubb does screenings to determine policyholders’ vulnerability to kidnapping.
One of the more popular services, according to O’Brien of Chubb, has to do with helping clients through the aftermath of identity theft. “ID theft has gotten a lot of press and it is a big concern especially for [the super-affluent],” she says. “We not only cover the cost of getting the person’s identity back, we also provide a service that helps them go through the process of getting it back, all the tracking involved.”
Identity theft is not the only worry. “One of the biggest concerns of the very rich is being targeted in a lawsuit,” says Soss, adding that his roster of clients includes entertainers and CEOs. “We have a policy that pays up to $25,000 in crisis management consultation with a public relations firm or attorney to do damage control. It’s a comforting thing for a lot of these clients.”
Insurers that specialise in the high-net-worth market also add bells and whistles to their homeowners’ policies. “The very affluent tend to have needs beyond the normal homeowner,” says Soss. “Many of them have multiple homes. And some of these are custom-built houses, with very different pieces that they’ve ordered from all over the world. Some have mansions with lots of landscaping and rare plants and shrubs. These are all things we cover.
“And if one of these houses were to be ruined in a fire or another catastrophe, it would take a lot of time to rebuild. We cover additional living expenses, with no cap,” he says.
Other insurers, however, have taken a decidedly different approach to meeting the needs of the super-rich. Curt Goetsche, senior vice-president for underwriting services at Atlantic Mutual Insurance, says that the company has eschewed specialised services, instead choosing to focus on “making life simpler” for high-net worth consumers with a one-stop shop plan. Last year, the company sold $170m in premiums on its Master Plan package policy.
“Our affluent customers have so many things, so much more stuff – watercraft, artwork, jewellery, multiple homes – that they really benefit from a package policy where they can have everything covered under one policy,” he says.
The plan is especially popular with customers with several homes, according to Goetsche.
“Say you’ve got your primary residence in New Jersey, but you also have a condo in Manhattan, and a place in the mountains in Colorado where you go skiing in the winter. It’s a lot simpler to have all these things under one policy.”
Goetsche says the key to success with high-net-worth customers is flexibility.
“Life is always changing for them,” he says. “For the middle market, customers generally buy a new car every two to three years, and buy and sell a home every five years. But it’s not uncommon for these individuals to buy new cars and homes several times a year. They value the service.”