A Path to Riches: Targeting High-Net-Worth Individuals to Achieve High Performance in Insurance

The High-Net-Worth Individuals (HNWI) customer segment—generally individuals with more than $5 million in liquid assets—continues to grow and change rapidly across North America, the single largest home to HNWI.

The population of HNWI in North America rose 8.6 percent in 2010 to 3.4 million-- after rising 16.6 percent in 2009-- and their wealth rose 9.1 percent to US$11.6 trillion.

This affluent customer segment is taking on new purchasing attitudes and behaviors. For example, as the economy and net worth rebounds, HNWI are purchasing more experiential luxuries or “passion investment” goods such as yachts, jets, priceless art, numerous homes and luxury autos which add to the value of their assets. HNWI also are focusing more on risk management and asset protection, taking a hands-on approach to their finances. In fact, 41 percent of HNWI want more self-control over their financial behavior.

These trends represent a huge growth opportunity for property and casualty insurance companies. Insurers that adopt more strategic ways to attract today’s HNWI and use segment-driven marketing innovation to help HNWI protect their wealth from complex property and liability exposures will be better positioned to capture and keep market share.

This report summarizes the key findings from Accenture’s analysis of the HNWI segment relative to their insurance needs. It also highlights key competitive strategies for insurers to attract and win this lucrative customer market.

Accenture research and analysis show that there is much diversity in the HNWI market segment. Among their many traits, current HNWI in the US primarily:

• Have high-value primary residences on the West or East coast

• Maintain liquid assets in excess of $5 million

• Require multiple complex policies that limit liability and protect collectibles, luxury vehicles, and second homes

• Prefer to purchase policies through non-specialist “Main Street” brokers

A notable sub-segment of HNWI is those in the mid-region of the US. They exist in a few, specific pockets of the region where they are underserved and under-targeted by incumbent carriers.

What is common across the segment is that many HNWI are underinsured, especially as asset values and personal liability risks increase. Like most Americans, many HNWI do not change their coverage limits as the value of their assets or risks increase. For the wealthy, this trend towards underinsurance leaves the individual open to substantial losses for which there is inadequate coverage. It is especially dangerous due to the wide fluctuations in the value of art, wine and other upscale collectibles.

While the risk exposure of HNWI is increasing, the number of insurers dominating the market remains few. The top three players in the sector account for less than 15 percent of the premiums in the market. While four or five carriers specialize in the unique insurance needs of the wealthy, about 75 percent of these customers are served by independent, Main Street agents and brokers.

Accenture recommends a three-phase strategy for insurers to pursue and penetrate the HNWI market:

Phase 1: Acquire current HNWI customers from incumbent carriers by offering a differentiated value proposition.

Phase 2: Target prospective mid-US customers who are underinsured and not yet loyal to a high-net-worth carrier.

Phase 3: Win the next generation of HNWI as their insurance needs evolve and before they become targets for existing high-net-worth carriers.

Among their top priorities, carriers will need to embrace four key strategies according to their market entry or penetration approach:

Enable flexible distribution channels. Innovative distribution channels are necessary to effectively connect customers and brokers and support strategies to strengthen the independent broker network to build market share.

Engage mobility and other technology solutions. A robust mobile capability will be essential to the 70 percent of consumers who expect to be using mobile devices in the next two years to interact with their insurer.

Maximize customer potential through analytics. An advanced analytics capability offers a competitive advantage in identifying specific customers, understanding their buying behaviors, cross selling to their needs and meeting their expectations for personalized products and services.

Offer innovative pricing options. For example, a major carrier now offers up to a 10 percent discount to households who employ a household manager. Managers who live onsite to screen vendors, manage contractors, and oversee domestic employees.

Across these key strategies lies the secret to entering the HNWI market.