A new wave of wealthy individuals are failing to protect their assets. Austyn Tusler argues the industry needs to get under their skin if it is to tap this market's growing opportunities
A few weeks' ago I was speaking to an acquaintance - the head of a division of a leading investment bank - about insurance. Naturally, I plugged Hiscox. This was met with the reply, 'but you only insure rich people, don't you?'.
I was taken aback by the fact that this successful individual, with significant material wealth, did not see himself as "rich". But, therein lies a clue to the attitude of the emerging wealth sector.
Predominantly made up of young professionals (aged between 25 and 45) with an income of anywhere from £50,000 to £250,000, the emerging wealthy see themselves as 'no longer ordinary, but not yet extraordinary'.
They have surplus cash and begin to exhibit wealth via jewellery or cars, for example. Their insurance policies - if they are actually insured - are likely to have been relevant once, but do not take into account their current situation, leaving them underinsured or inappropriately covered.
Our research shows that currently 40% of the UK's wealthy* do not use a broker and there are indications that this number could be higher when looking specifically at the emerging wealth sector. It is clear that many individuals are unaware of the advice and cover that is available to them, but also that we as an industry have a long way to go in channelling opportunities in this area.
Back to school
So what can we do? The first step is to learn as much as we can about the emerging wealthy. It sounds obvious, but once we find out what makes these individuals tick, we will know how to respond to their needs. We will know how to talk to them.
Customer insight research is a useful tool in determining what motivates consumers and we are starting to use this at Hiscox. This kind of research is very common in the FMCG (fast moving consumer goods) sector, where, for example, companies such as Cadbury use it to develop and market new chocolate bars to a very specific audience. It is not as common in the insurance industry but, if we want our customers to demand our products, then it is surely a step in the right direction.
This research provides us with qualitative information on the habits, attitudes and aspirations of customers and can be distilled down into a number of core 'insights'. These insights can determine, as mentioned above, product innovation and communication; for example, how we can speak to a customers in a way that relates to their own values.
Back to the emerging wealthy - what else do we know about them? Our research, combined with data already available in the marketplace, indicates they are extremely motivated and aspirational.
They are on their way up and have worked hard towards their success. In many instances, they have not come from wealth and do not stand to benefit from inheritance.
The Sunday Times Rich List is a good barometer and shows that change is occurring and where the emerging wealthy may end up. This year's ranking includes less inherited wealth, less 'titled' individuals and more entrepreneurs. There are also more women, who have become independently wealthy through successful careers.
Individuals in this area know they are different from the norm and, as they have 'earned' this difference, like to feel they deserve special or bespoke treatment. There is a move away from the mass market and from big brands towards niche products and interests; they are more experiential, and, wanting to be connoisseurs, have taken up hobbies such as collecting art, wines or going on exotic cooking holidays.
We know that these individuals are confident and efficient. They like to make their own decisions, and quickly. We also know there is a kind of marketing fatigue within this sector; they feel over-sold to.
Obviously, this means we not only have to adapt our products and services but, and this is particularly relevant to brokers, also our style when dealing with customers in this sector.
The emerging wealthy are looking for tailored and fast solutions. This does not necessarily mean the internet (although this is an important component), as research shows these individuals look for advice and increasing levels of validation (mostly from their peers) when it comes to significant purchases. There is an opportunity here for brokers to establish themselves as the referral point and offer specialist advice.
Footloose and fancy free
The mobile lifestyles of the emerging wealthy will also need to be taken into account. A real bonus for these individuals will be the ability to service their insurance needs wherever they are based. The key is being able to provide a total solution, which might mean taking overseas homes into account, for example.
Importantly, brokers will need to adjust their marketing and prospecting tactics. These consumers, who in many cases have not come from a wealthy background, will not have had contact with a high net worth broker, so it will be in brokers' interests to undertake some direct marketing in their areas.
We know the rich are getting richer and the world is getting smaller. This means there is a growing market to explore and there are still a lot of untapped opportunities in the HNW insurance market (and on its fringes). Improving our understanding of customers through research will help us to realise these opportunities, enticing clients with relevant products and services.
Austyn Tusler is head of Hiscox's art and private clients division
- Hiscox estimates a high number of the UK emerging wealth sector do not use a broker
- The emerging wealthy require comprehensive and bespoke solutions as well as efficient service
- Research will help the industry gain a better understanding of this sector's needs.
*Research based on individuals with over £100,000 of assets.
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