How agents meet the affluent’s expectation of a luxury experience

By Eric Pruss | March 6, 2006

That the affluent expect a luxury experience sounds like a self-evident fact. But, how many companies really know what defines a “luxury experience” for the affluent? And an even tougher question: how many companies can deliver that “luxury experience”?

It used to be that luxury would be defined by and associated with a price and a label placed on a product. In this context, luxury experience was all about acquiring such luxury items. In fact, the more expensive the item purchased, the greater the luxury experience. Following this definition, watchmakers, auto manufacturers, cloth designers and others made their mark on the wealthy and established such “household” brands as Patek Philippe, Rolls Royce and Parada.

But as the saying goes, “This is not your father’s luxury experience.” Today, luxury is all about service. ThereforeToday, luxury experience is defined by services that make the consumer feel pampered and unique. The more exclusive the service, the greater the luxury experience.

Leading the charge in providing this type of luxury experience is the financial services industry. From financial planners, to wealth managers and private bankers, and, ultimately to family offices, the wealthy consumer is afforded a level of financial planning and investment management not readily attainable by the mass population.

So how can the insurance companies and agents and brokers cash in on this trend in affluence and capture that most desired segment of the population?

The answer is simple: Provide a concierge quality interaction at every touch point of the insurance transaction and offer products and services that meet the complex and unique risk exposures that accompany affluence.

Every insurance discussion should be based on risk management in the broadest definition of the term. This is not your typical insurance review where an agent “analyzes” the existing declaration pages and offers a “similar but different” insurance package. This is risk management that starts with a complete understanding of the prospect’s lifestyle and life stage. It starts in the same place where a good financial planner begins. Only then can an insurance agent ask the right questions and offer the appropriate risk mitigating solutions.

In most cases. this solution should be a balanced package of:

R risk prevention tips; R risk mitigating and resolution services; and, R risk transfer (insurance) products.

Teamed up with the right insurance carrier (that offers such services and products), an the agent or broker can, with confidence, offer a unique insurance service for the affluent that will take the insurance transaction from drudgery to a true “luxury experience.””. IAnd in the world of insurance, that would be achieving that “real peace of mind.”

How many consumers:

Get real help in evaluating their property value to ensure enough property coverage?

Get a chance to discuss their lifestyle with professional security consultants to determine their family’s susceptibility to risks such as home invasion, kidnapping or identity theft?

Get legal consultation on hiring and managing household employees or serving on not-for-profit boards?

Receive up-to-the minute warnings about travel destinations and travel risks?

It takes this level of risk evaluation and mitigating services to satisfy today’s affluent consumer. Of course to meet all the risk exposure needs of the affluent, agents and carriers must be able to offer insurance products that meet the full range of their uniqueness and complexity. Here are some of those products.

Luxurious possessions warrant specialized coverages and higher limits not afforded by standard insurance policies.

Custom and historic homes with intricate designs, superior craftsmanship and expensive building materials can be difficult and costly to repair or replace. A surge in construction costs or materials can leave homeowners with large coverage gaps. An extended replacement cost policy often can provide an unlimited amount of coverage beyond the policy limits. Also, additional living expense coverage should enable clients to reside in a home of similar stature while their permanent residence is being rebuilt.

Flood insurance available throughthe National Flood Insurance Program can be inadequate for homes with replacement costs in excess of $250,000, the program’s maximum limit. New flood products from private insurers provide both substantially higher limits and broader coverage.

Condo and co-op owners often do not realize that their association’s insurance policy may not cover the full cost of damage to common areas. New all-risk policies can provide limits for assessments as high as $100,000, as well as for additions/alterations inthe unit.

Expensive artwork often is best protected by itemized coverage that considers appreciation in value. If the pre-loss market value of an item is greater than the itemized coverage amount, the policy could pay as much as 150 percent of that amount.

When a new car or yacht is driven off the dealer’s lot, its market value begins to depreciate. Agreed value policies provide coverage up to the purchase price with no deductible and no depreciation.

In today’s litigious society, a slip on a poolside tile, inappropriate words from a guest to a housekeeper, or one wrong decision made on a volunteer board can cost a client millions of dollars. In addition to excess liability coverage with high limits commensurate with the clients’ wealth, new coverages provide financial protection in areas of expanded risk.

Employing household help or yacht crews can expose a client to an employment practices lawsuit. Allegations of employment discrimination, sexual harassment and wrongful termination can lead to huge jury awards or settlements, legal fees and even public relations expenses to minimize reputational damage.

Service on a private company or not-for-profit board can put a client’s personal assets at risk. While public companies often indemnify board members, private companies and not-for-profits may not. If a board doesn’t indemnify its members or its insurance limits are exhausted, board members may be required to forfeit their personal assets. Independent directors and officers liability policies can cover multiple directorships and gaps in other D & O policies.

When a client’s family is victimized by a violent crime like burglary, stolen property is not the only thing taken. While no insurance can undo emotional pain, agents and brokers can help the financial complications.

Home invasion, stalking and child abduction are traumatic experiences for victims and their families. Victims may need to take time off from work, seek psychiatric counseling, upgrade home security systems and even temporarily relocate their residence. New insurance products address these and other expenses, if not covered adequately.

Vacations and business travel to exotic and other locations can place clients in grave jeopardy, especially since personal safety is often the last thing on their minds when planning a trip. If a client suffers a medical emergency in a remote location, evacuation costs alone could cost tens of thousands of dollars. New travel accident policies cover all family members during all trips within an annual policy period. They cover transportation to Western medical facilities, and unlike health insurance policies, they can assure that patients will not be turned away by foreign medical institutions requiring payment for services.

Combined with a luxury service experience, these new and enhanced insurance products will help satisfy the needs and desires of high-net-worth and other affluent consumers. The agents and brokers who provide this full luxury experience will have a competitive edge in an expanding affluent market.

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Insurance Journal March 6, 2006
March 6, 2006
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