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Tackling the complex insurance needs of high-net-worth individuals

The bespoke risk analysis and tailored insurance cover approach seeks to simplify the complicated.
Image: Bloomberg News

That the world can be beleaguered by unknown and unexpected events became clear during the last two years. Not only has the Covid-19 pandemic impacted businesses and personal lives, but sudden riots and a significant increase in digital crime has created new risks to livelihoods, property and personal belongings.

“The wheel of risk is turning, impacting particularly high-net-worth individuals (HNWIs) who should be alerted to new risks,” says Darrel Dawson, head of Echelon Private Client Insurance, a specialised division of Santam that focuses on risk management for professionals, business owners and business executives.

“One of the greatest concerns is the increase in cyberattacks specially targeting HNWIs. They are seen to be easier to attack than businesses. With cybercrime now posing a significant threat to this group, there is an increased need to shift focus to protecting assets in the virtual sphere,” says Dawson.

Lifestyle analysis

Although Echelon is known for focusing on the LSM 10+ market segment in SA, Dawson points out that it does not use a rigid definition to define wealth, like most other insurers tend to do. “We developed our own lifestyle matrix that takes a holistic approach of an individual’s status, built largely around their education, occupation and mix of assets.

“Clients are individually rated according to the matrix across a range of lifestyle factors to eliminate cross-subsidisation and to create space to offer an individually-tailored product with superior benefits, yet still competitive in a price-sensitive market,” says Dawson.

“While it can be argued that such clients could use regular insurance products – because the baseline cause of a loss may be no different to any other customer – there are subtle and important differences and the potential for damage is often much greater.

“A burst geyser, for example, may destroy a very valuable artwork. In many cases, most people don’t really realise what their assets are worth, until they are damaged, destroyed or stolen.”

Dawson believes the solution to new emerging risks and, in many cases unique assets, is that every policy should have a degree of bespoke design to take into account the economic, environmental, technological and social risks, as well as the variable types of risk exposure.

Examples of unique risks

For instance, in the case of a collection of antique and other expensive watches, Echelon would assist the client in securing a credible valuation and then tailor the cover according to the exposure. Is a watch worn every day, or only occasionally, or is it only on display?

Similarly, clients might own more than one (often several) expensive and out-of-the-ordinary cars. Many might be locked up most of the time, because the owner can only drive one car at a time.

Echelon has a product (Classic Motor) to cater for such vehicles, considering the limited usage common in these instances. It also caters for unique risks associated with owning sexy cars, such as one that is used as a wedding car or another being stripped for restoration.

The same bespoke approach is used when looking at designing cover for collectables such as an expensive piano or cello, antique furniture, expensive paintings and rare wines. It will be specifically and individually underwritten at the fair retail value of the collectable, as guided by experts, and the extent of the risk exposure.

Risk changes

Dawson says risks have changed significantly. However: “For the majority of Echelon’s 12 500 clients, the changing risks created by the Covid-19 pandemic and the increase in cybercrime have been manageable.

“HNWIs are generically very savvy about changing risk scenarios, especially those who are business leaders or innovators, who at their core, understand what risks they can accept or need to transfer by way of insurance,” he says.

Dawson points out that these have been as simple as less road risk given work-from-home scenarios, to the more complicated exposure of cyber security threats and identity theft.

“Our clients tend to be tech-savvy, research-oriented and financially astute, thus demanding a bespoke approach to their insurance needs.

“It is not uncommon to find two or three different intermediaries taking care of the insurance portfolio of a single client, be that their business, personal assets, or investment and life insurance needs.”

This is also why, given Santam’s comprehensive basket of offerings, ring-fencing gives Echelon a competitive edge.

“There is a major advantage to this,” says Dawson, “as our intermediaries are able to align client needs and risks, and spread security. Because each contribution is part of a bigger portfolio, there is a vested interest to ensure everyone maintains meaningful and beneficial relationships.

“As our country becomes more developed and sophisticated, so too do our customers and their wealth creation opportunities. It falls on us to help and direct our HNW clients to understand their unique profile and insurance needs.”

Brought to you by Santam.

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