Feels Like Home

How has the state of the high net worth (HNW) market changed over the past several years with all the major CAT events, from the California wildfires to coastal hurricanes?

These have been devastating losses for the industry, and the high net worth market has certainly not been immune. It’s been a very challenging few years, and it’s forced many carriers operating in this space to make some tough decisions to help improve profitability. We have seen some dramatic changes to both capacity and underwriting guidelines because of these events and, with fires currently raging out west, these trends are likely to continue. I’m hopeful additional capacity will be deployed and that carriers will get creative, whether that means using more E&S solutions, or even restricting some coverages. We are going to need solutions in some of the markets, such as California and Florida, which are enormous high net worth markets and home to some of the largest accounts written in this segment.

How has the increasing number of carriers in the high net worth space changed the dynamics of agency choice?

The days of having one or two options for your clients is long gone. Between new carriers and consolidation, the high net worth market looks a lot different than it did 10 years ago. Vault, PURE, Cincinnati, and Berkeley One have all entered the space, in addition to AIG Private Client Group and Chubb, which had long dominated the segment. These new carriers bring new products, different underwriting appetites and creative solutions for helping to provide coverage for the many unique situations that folks in this space possess. From my perspective, increased competition is great because it not only provides clients and potential clients with options, but it also keeps all of these carriers focused on innovation and refining their strategies and relationships with their agency partners.

How important has product innovation been to the high net worth market?

Innovation is incredibly important for the HNW market in much the same way it is for the overall insurance industry. Coming to market with new products, new coverage options, and new technologies—both front end and back end—that help scale and improve the efficiency of agency partners is increasingly a form of survival. Both the insureds and agents demand these improvements. While strides have been made on the technology front, carriers have a ton of work ahead to update their platforms. Many still do not have slick user interfaces and are clunky at best. The carriers that do not invest and innovate are going to see their growth and profitability suffer. From an agency perspective, I believe the same is true. Whether it’s better end-to-end integration with quoting platforms, or creating bots for quicker quoting, the more streamlined and nimble an agency, the better chance to capitalize on this dynamic market and attract top-end talent, both of which deliver greater enterprise value.

From a cause of loss and claims perspective, where are the majority of losses coming from?

While the last few years have seen a slew of very large CAT events, much of the loss has been non-weather related. Losses resulting from water damage, such as failed washing machines and busted service lines, have been mounting and they are helping to drive premiums increases as well. These losses are also fuel growth in the E&S market, which has the flexibility to allow underwriters to adjust rates for exposures which admitted carriers typically can’t do. It’s for reasons like these, many high net worth carriers will do business through E&S.

Do you see more carriers getting involved in E&S facilities to better serve the high net worth markets, such as the recent announcement from AIG about setting up a new Lloyd’s facility specifically for high net worth business?

The short answer is absolutely. Because high net worth carriers have suffered huge losses in the past several years, some providers have been ramping up their use of E&S as an alternative. To be able to control rate and form and to do so in a much more dynamic way on the admitted side is a huge advantage. Added to that gain is the ability to react to the ever-changing needs of the HNW market and E&S will likely become an even greater percentage of what is written for affluent individuals and their families.

How has the use of third-party data impacted the high net worth market?

Third-party data is highly important to the high-net-worth market. Carriers are not only using the large quantity of their internal customer data but tapping into third-party vendors who can deliver additional risk level details that enable more sophisticated pricing and risk management. In time, I believe we’ll see more third-party integration of data, which will lead to improved underwriting and, hopefully, long-term profitability that drives more stable rates. For this to work, carriers need to integrate this data into their quoting platforms in a seamless manner which greatly diminishes the number of keystrokes required for quoting a new risk. Admittedly, carriers are making progress, but we’re definitely not there quite yet.