The unprecedented destruction of wealth due to the financial crisis and its lingering
effects have forced affluent consumers and even the super rich to do something
they rarely like to do—take a hard look at their personal insurance program.
Affluent consumers are likely to over-insure against minor threats and under-insure against major ones, according to ACE’s survey of 600 independent agents and brokers. They’re also likely to miss easy savings opportunities.
Independent insurance agents and brokers frequently find that families with substantial assets who insure their homes, autos, watercraft, and valuable collections with mass-market, heavily advertised carriers overpay for protection that still leaves them exposed to severe financial loss.
What are the specific risks, and why are these high net worth (HNW) families paying more than necessary? To find out, ACE Private Risk Services surveyed more than 600 independent insurance agents and brokers in 2010 and again in 2012 about their new HNW clients who were previously insured by a mass-market carrier. The survey asked if the clients were likely overinsuring or underinsuring for 21 types of coverage. It also asked about the likelihood of 11 types of savings opportunities being missed.
A Widespread and Worsening Problem
The agents’ answers reveal that the problem of overpaying to be underinsured has worsened overall. On average, significantly more agents in 2012 than in 2010 said each type of coverage was likely underinsured and each savings opportunity was likely missed.
|Average Percent of Agents Saying:||2012||2010||Ppt. Chg.|
|Each coverage underinsured||58.3%||54.9%||+ 3.4|
|Each coverage overinsured||7.5%||7.8%||- 0.3|
|Each savings opportunity missed||27.7%||22.1%||+ 5.6|
Top Areas of Overpaying
Having deductibles that were too low, failing to earn package discounts, and not getting premium credits for alarm systems and other loss prevention devices continued to top the list of missed savings opportunities. The likelihood of missing the last two increased significantly from 2010 to 2012.
Top Areas of Underinsuring
Coverage for umbrella liability, valuable collections, uninsured/underinsured liability, and rebuilding a damaged home remained the most likely underinsured risks.