Insuring the wealthy is like insuring a business

According to 'New World Wealth' analyst Andrew Amoils, the bulk of these individuals live in the Sandton area, particularly Sandhurst, Hyde Park, Bryanston and Houghton. "The majority of the new multimillionaires earned their money from telecoms, insurance, healthcare and banking."

While it is positive to note this financial growth, these High Net Worth (HNW) individuals do face a unique challenge when it comes to protecting their assets and should be treated as a business risk.

This is the view of Warwick Scott-Rodger, Head of Brokers at MUA Insurance Acceptances, who says that the HNW market face a greater risk of underinsurance as a result of their assets often being worth far more than the average consumer. "As a result, it is important to implement proactive risk management (traditionally reserved for commercial risks) into the insurance process, to better ensure the sufficient level of cover required for these individuals."

When insuring the wealthy, their different tastes and lifestyles need to be taken into account by the insurance company, he points out. "Some people enjoy highly public roles, entertaining guests at parties, fundraisers and art exhibitions. Others may collect vintage automobiles, rare pieces of jewelry or expensive pieces of art. The risks that confront each individual's personal assets can vary, which is why a tailored approach to insurance needs to be taken."

Both wealthy consumers and HNW brokers alike can make false assumptions about the level of risk, he says. "The assumption of the insured is that high insurance limits alone - buying the most insurance - will take care of all threats to personal wealth. Unfortunately, this is not always the case."

Scott-Rodger says that a thorough risk management assessment should be conducted at the inception of a new insurance policy in order to mitigate the risk of claim rejections in the future. "Not only does this allow for areas of weakness to be identified upfront, which gives the consumer time to address these areas, but it also ensures the assets are fully covered for the correct value."

He adds that when wealthy consumers look at updating their existing insurance policies or getting a new one, they should get a full risk assessment and valuation by an independent and qualified assessor and/or valuator. "The report generated, which should contain proactive risk management advice, will help the individual to make informed decisions about implementing risk improvements that, if not addressed, could lead to claim rejections."

The types of risks that can be identified in a risk assessment could include discovering that the alarm system does not cover all areas of the property, he says. "These risks should be highlighted by the insurers. If nothing is done to reduce the risk, insurers should structure the policy to ensure appropriate cover for that particular area."

A further example would be cracks that appear in the wall, indicating a lack of maintenance. Scott-Rodger says that homeowners are advised to fix this immediately, as any claim that arises as a direct result of poor maintenance will be repudiated because it is the homeowner's responsibility to keep the property in an insurable condition.

Looking at the types of complaints that arise with the Short Term Ombudsman, these are usually as a result of insurers trying to underwrite the risk at claims stage, when it is clearly far too late, says Scott-Rodger. "By conducting a proper risk analysis upfront, the correct risk premium can be determined and the individual's claims are far more likely to be accepted."

"High net worth consumers need to be aware of their insurance risks and be proactive in working with their insurers to ensure that they receive appropriate and adequate cover to suit both their assets and lifestyles," concludes Scott-Rodger.