Most of us are familiar with the carriers that service the high-net-worth marketplace, such as Chubb, Fireman's Fund, AIG Private Client Group, AXA Art and Lloyd's of London. What you might not be aware of is that when an experienced, knowledgeable broker designs a program for your clients, they must work very closely with the carrier to create a program that is customized for each individual risk. They work closely with the underwriters and form teams of three or more specialists who oversee everything on the account-making on-site home inspections, performing appraisals for the full replacement cost of a client's home and evaluating security, protection, loss-protection strategies, available water sources, art risk management and the overall maintenance of each individual property in the program.
What you also may not know is that the carriers in this particular marketplace have several rating tiers within their programs and they take multiple factors into consideration when rating your clients' policies. It's important to note that there are many variables that directly affect your clients' policies from one location or risk to another, and it's important to know exactly what those variables are.
Some policies, for example, have an alarm service warranty that says you must maintain a fully connected and operational alarm system at all times if you have an alarm installed at your location. This is especially true of some fine art policies. If you decide that you don't need central station alarm services at your secondary location and you cancel the alarm service and subsequently have a fine art loss there, then the claim can be denied because you were in breach of your contract with your insurance carrier. Or it could be that your insurer no longer wants to insure your vacation home if it does not have a water-detection and fire alarm system.
Insurers view risk management for high-net-worth individuals even more favorably if your client has a full-time caretaker. It is possible that your client's carrier only wrote a certain complex property risk because it believed the client would have a caretaker on the premises to deal with any issues that could arise in the client's absence. Most policies that are designed for the high-net-worth market sector have healthy credits on them for clients with full-time caretakers. Thus if your client is thinking of cutting back expenses by letting a caretaker go, this is important information that he needs to share with his insurance broker. It is possible that his carrier was only initially willing to underwrite his risk because the company felt more comfortable with the caretaker on the property. Again, the changes you make to your budget, and thus your lifestyle, can directly affect the way the insurance carrier views your risk.
Many other things could critically affect your insurance as well, even something as simple as a pool that is filled year-round as a reliable water source. Let's say, for example, that you want to conserve energy, so you decide to drain the pool so you don't have to heat it throughout the winter. Some underwriting programs rely heavily on pools as additional water sources in rural areas, so many carriers would view the risk as unfavorable without such a water source.
Underwriters also take into consideration things such as the condition of the roof of your house, the wiring and electrical updates and the age of your plumbing system. The maintenance of the property is also closely looked at. If your carrier goes out to inspect the client's property, it could request that certain trees be trimmed if the inspectors notice a hazard. These might be the same trees that the client decided not to trim this year because of cutbacks in his household budget.
A lot of insurance programs designed for high-net-worth individuals anticipate that the policyholder will keep the property well maintained, with all the protections in place that were originally noted at the inception and design of the program. If your client has made changes, it's critically important to let the broker know because it could also result in a change to the program.
By the same token, there are many ways that a client can trim his insurance premiums. A good broker will know the many methods of good risk management and will clearly lay out all of the options for the client and spell out the savings and what he has to do to achieve them. The client might want to increase his deductible, for instance, and take a chance that if a loss occurs he will absorb the higher deductible; if there are none, he will have saved money that year. Some of the better policies will waive your deductible if you have a loss of $50,000 or more. It's worth looking into with your broker.
If your clients are committed to a pared-down household balance sheet, then insurance costs will definitely come up in your discussions with them. Now would be a good time for the client to meet with his broker (and his business manager, if he has one) to go through his program and take a look at what he is covering, what pertinent factors are affecting the overall program and what he is paying and to ask why his insurance expenses are exactly what they are.
He must know the facts before he makes changes.