Rising wealth in SA highlights need for specialised insurance

A recent survey published by New World Wealth reveals that Johannesburg is the wealthiest city in Africa, with the total wealth held in the city amounting to US$235 billion. Cape Town comes in at second place on the continent, with a total wealth of $130 billion. Also highlighting the predicted growth of wealth in South Africa is the Knight Frank 2021 Wealth Report, which predicts that the number of ultra-high-net-worth individuals (UHNWIs) will rise 32% by 2025.

According to Bertus Visser, Chief Executive of Distribution at PSG Insure, the rise in high-net-worth individuals (HNWI) in the country, coupled with rising crime figures, has led to a growing need for specialised and tailored insurance product offerings suited to the profile of this audience.

He says that defending fortunes against the exposures inherent in luxury assets such as super cars, priceless art or luxury homes requires highly sophisticated insurance policies. “There are certainly unique risk features to be considered, including special-asset valuations and specialised underwriting.”

“There are various risk features to be assessed. For HNWIs especially, proper planning is crucial to protecting wealth against life's unexpected events and preserving it for future generations.” He explains that underinsurance is a risk in itself. “When insuring high value items, underestimating claims amounts and the true replacement value of certain assets is a common error. Many luxury items are imported from Europe or other global destinations and currency fluctuations must be built into the estimated replacement value. In order to avoid being underinsured, it’s crucial that HNWIs work closely with an adviser to develop a tailor-made insurance portfolio.”

He says that there are two main reasons why many wealthy individuals are underinsured; either a proper assessment or valuation was not conducted at the time that the policy was instated, or it was not reassessed at renewal stage. Rare and expensive assets generally increase in value over time and if they remain insured at the initial sum insured for an extended period, chances are it could be underinsured. “Wealthy individuals should work with an adviser that is a trusted partner and disclose all available information to ensure that a proper evaluation is done and that luxury or rare collectible items can be replaced should they suffer a loss.”

Visser adds that high-value assets such as fine wine and rare book collections, art or super cars often have to be stored in specific conditions and in some cases, in a temperature controlled environment. “Proper risk management is therefore crucial to maintain their condition and working with a good adviser can help ensure your investments don’t depreciate in value.

“An insurance portfolio for HNWIs should really be managed much like an investment portfolio as the high-value physical assets being insured are in effect investments that need to be properly managed.”

With the number of HNWIs in South Africa projected to continue rising, the complexity involved in insuring their personal risk and physical assets must not be overlooked. A tailor-made specialist risk management portfolio should be a key priority,” Visser concludes.