Household Insurance for the Affluent

The HNW insurance market is currently experiencing a number of changes. Composite insurers have challenged more established players which has led to product innovation as insurers try to differentiate their offerings. This brief examines the strategies that insurers can employ to achieve success in this niche sector of the household insurance market.

REPORT HIGHLIGHTS

The suitability of online distribution is restricted to mass affluent MNW business, as it would be of little use to larger niche risks currently dealt with by brokers. Banks and building societies have also yet to make an impact in the sale of HNW insurance.

In the long term, FSA regulation may favor higher premium insurers competing on product quality and service, rather than price. As transparency improves, customers will be increasingly able to make an informed decision as to the type of cover they require based on specific product features.

Although certain insurers have claimed that developing risk trends have prompted the introduction of extra covers, evidence from the Home Office's British Crime Survey does not appear to entirely support this assertion. Nevertheless, extra covers for car-jacking, stalking and identity fraud are low risk product differentiators.
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CHAPTER 1 MARKET CONTEXT

Introduction
What is High Net Worth insurance?
Who are HNW individuals?
High Net Worth market size
Datamonitor’s Global Wealth Model
The number of HNWs grew by 16 per cent in 2003
Penetration levels are relatively low, but will rise slowly
Underinsurance is still a huge problem
Underwriters are facing a flat rate environment at present
Insurers have benefited from a benign claims environment of late
Insurers are introducing new covers as risk-free differentiators
Mid Net Worth insurance
What is mid net worth insurance?
The number of MNW individuals is currently growing

CHAPTER 2 DISTRIBUTION

Brokers and intermediaries dominate HNW distribution
Online distribution is limited to certain market sectors
Banks have yet to make an impact
Regulation looks set to affect HNW distribution and premiums

CHAPTER 3 CUSTOMER FOCUS

Introduction
Increasing penetration and growing the market is more important than poaching business from rival insurers
Strategies to target the HNW customer
Use the claims function as a key differentiator
Extra covers appeal to some and are relatively risk-free
Targeting the elderly will prove worthwhile
Strategies to target the MNW customer

CHAPTER 4 COMPETITIVE DYNAMICS

Introduction
Company types
HNW players can be split into two key groups
Competitor profiles
Chubb
Hiscox
Oak Underwriting
Zurich Private Clients
Other players

CHAPTER 5 THE FUTURE DECODED

Introduction
HNW forecasts
The number of HNWs is forecast to grow strongly
Penetration will rise slightly
Underwriters will continue to face a flat rating environment
MNW forecasts
The mass affluent population wll grow at a slightly slower rate

CHAPTER 6 APPENDIX

Datamonitor’s Global Wealth Model
Quantitative assumptions
Methodology
Continuous refinement to the understanding of liquid wealth distribution
Current and future readings
Relevant links
Datamonitor’s custom research capabilities
SPP writing team
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Table 1: Number of UK HNW individuals by liquid asset band, 1999-2003 11
Table 2: Selected number of offences from the British Crime Survey, 1999-2004 18
Table 3: The number of MNW individuals in the UK by liquid asset band, 1999-2003 21
Table 4: UK HNW individuals by age band, 1999-2003 29
Table 5: Forecast number of HNW individuals by liquid asset band, 2003-8f 43
Table 6: Forecast number of MNW individuals by liquid asset band, 2003-8f 46
Table 7: Development of macroeconomic variables in Datamonitor’s Global Wealth Model, 2003-8f

Figure 1: The number of HNW individuals grew strongly in 2003 10
Figure 2: There has been no significant shift towards aggravated burglaries, car-jacking, kidnapping and credit fraud in recent years 17
Figure 3: The number of MNW individuals recovered in 2003 20
Figure 4: Over half of HNW individuals in the UK were above the age of 65 in 2003 28
Figure 5: A key distinction can be made between composites and specialists 33
Figure 6: Some insurers are offering an array of extra covers 39
Figure 7: The number of HNW’s is forecast to grow by almost 7 per cent per year to 2008 42
Figure 8: The number of MNWs will grow by more than 6 per cent each year to 2008 45
Figure 9: Datamonitor’s core consulting capabilities 51
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