Brokers informed: Real world threats demand bespoke solutions

2017 was a year marked by a significant rise in recorded crime in England and Wales. The Crime Survey of England and Wales released in October 2017 for the year ending June 2017 revealed a 13% increase in recorded crimes on the previous year, pushing the total number of offences over five million for the first time. This constitutes the largest annual rise in a decade – and should prompt specialist high-net-worth insurers and brokers to review just what protection they are offering their clients.

In addition to the CSEW’s data, the Office for National Statistics reported crime categorised as ‘violent’ rose by 19% in 2017, with rises in offences including stalking and harassment. With the number of violent crimes against adults estimated at 1.2 million, two out of every 100 adults in England and Wales were the victims of some form of violent crime.

In tandem, police-recorded offences of ‘violence with injury’ rose by 10% to just under 500,000 crimes. It is also worth noting that, in previous years, an estimated one-in-three violent crimes reported to police were not ultimately recorded as such. This means that the true level of violent crime could be higher than reported.

Worrying trend

All in all, the statistics point to a continued rise and this worrying trend is clearly on the minds of HNW individuals.

For society in general, these figures raise a concern, but how do the trends specifically impact HNW individuals? Their profile and wealth can certainly make them natural targets for criminals who, given the ever-improving security protecting homes and cars, are increasingly resorting to physical attacks to carry out theft offences. During 2017, there was a series of headline-grabbing incidents of aggravated burglary, including, tragically, one that ended in the killing of a wealthy business executive.

These statistics clearly show HNW individuals are facing an increased threat to themselves, their families and lifestyles. Chubb commissioned independent research experts Longitude to conduct a study of over 500 HNW individuals to understand their perceptions of the threats to their lifestyles and the wellbeing of their families.

The results, to say the least, painted a fascinating picture of the competing desires and concerns in the minds of this demanding group of individuals.

Increasingly vulnerable

Overall, the research made it clear that this group felt increasingly vulnerable. When asked to consider a variety of environments – home, work, travelling – on average, 28% felt more vulnerable than five years ago, while only around 16% felt less vulnerable.

However, one of the most telling findings was that while much of the mainstream media – and much of the insurance market – has focused on the growing threat of online risks, the HNW individuals we spoke to were most concerned by the prospect of physical attacks and threats.

Asked to think beyond loss or damage to possessions, aggravated burglary remained their primary concern. The prospect of violent home invasion was the single most pressing worry. Ranking second was kidnap, though it must be said that while the number of kidnappings and abductions remains relatively low, latest statistics place the UK at number 10 in the UN Office on Drugs and Crime global league table.

This is not to say the HNW study group was unaware of the threat created by online activity and the increasingly connected world. Quite the contrary. Affluent families are particularly vulnerable to this type of activity because their high profiles make them visible to criminals as well as susceptible to threats of extortion based on reputational damage. Just under a quarter (23%) felt their status made them a target for extortion, while 16% believed it placed them and their family at risk of cyber bullying.

A newer area of concern for HNW parents was the growing problem of photo sharing among children and teens. Images swapped innocently between friends can take on a totally different hue if they fall into the wrong hands. Worse still, more intimate images shared between teenagers and young adults can cause problems for the sender as well as opening up both sender and their family to the risk of extortion or bullying.

The need for appraisals

A comprehensive appraisal is crucial to the success of a HNW product. Typically, an insurer of affluent clients will conduct an appraisal of each client’s property as part of the underwriting process. But not all appraisals are created equal.

It is important to conduct comprehensive face-to-face appraisals that include buildings, outbuildings, land, furnishings, possessions – in other words, everything the client considers important to them. Security should also be reviewed  – something that’s clearly relevant bearing in mind the respondents’ concerns about aggravated burglary.

An appraisal is vital for several reasons. It allows assets to be valued accurately so that, should a claim be made, the replacement value of the item has been agreed in advance, hence no delays or unpleasant surprises.

Assessing risks

Appraisals also allow the assessing of risks to which the client’s assets and lifestyle are vulnerable. Detailed and informed risk management advice can then be provided such as moving an oil painting away from a hot spot in a wall or strong sunlight that could fade it. A ‘duress code’ could also be added to a safe so that it sends a silent alarm should the client be forced to open it.

The latest crime data has given insurers an incentive to review and improve the protection offered to HNW individuals. But the research has highlighted another challenge – to educate the market. Far too many HNW individuals buy standard insurance products using online aggregators. These products, even with higher limits, are simply not suitable for these clients.

Yes, technology brings with it new concerns, new exposures. But the threat of physical and mental harm, combined with the core risk of property damage, still occupy a central place in the thoughts of these clients. As a market, we need to ensure cover evolves, but not at the cost of ignoring those core covers that provide real peace of mind.

 

 

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