David Sweeney, head of commercial and personal lines at Sterling Insurance, discusses the differences between old and new wealth when it comes to insurance. 

In insurance, it is impossible to define a typical high net worth customer because customer profiles are each so different. However, there are a range of common characteristics.

Firstly, there are different insurance profiles for high net worth customers who are "new money" and those who are from "old money".

For the "new rich", jewellery and gadgets form a large proportion of the sum insured, while "old money" customers are likely to have a sizeable property and a large number of antiques.

We generally see a higher number of "new rich" customers, for whom urban living will inevitably bring a higher insurance premium than life in rural areas.

The distribution of wealth has changed over the years with more money now in the hands of a generation of people whose income has come during their working life rather than through income and assets coming from inheritance and their land and estates. The newly monied tend to have more available cash funds as their wealth is more liquid and they can better afford to maintain their property.

The assets acquired by 'new money' tend to have been bought more recently and so are more easily valued. Assets that are inherited are, by definition, on average, older and will tend to not have been valued for insurance purposes - high valuations at probate stage would naturally lead to more tax and so there may be a temptation for values to be minimised. Older money would also tend to have older property which may not be as well maintained.

Individual insurance requirements have also become larger as levels of individual wealth have grown. Equally, the complexity of risks has increased due to customers’ busy lifestyles. The larger and more complex an individual’s requirements, the greater the need for a tailored insurance solution.

This is why another special emphasis among high net worth insurance clients is the demand for high levels of service, particularly in claims. Customers will expect specialist cover that covers all eventualities. High net worth policies provide exceptional cover and thus are good value for money. An example of where high net worth policies provide more cover than might be expected elsewhere is when the policyholder has been subjected to an aggravated burglary, which unfortunately is becoming increasingly frequent. 

In addition to providing cover for the items stolen, a quality high net worth policy will also allow financial support for the policyholder to have counselling, to carry out security improvements to the home and also even assist with conveyancing fees if the policyholder chooses to move. There have been several claims where these additional expenses have been paid plus in a few cases some temporary accommodation too.

Customer choice and quality advice are fundamental and policies should have the option of additional services such as free appraisals and a claims concierge services. 

Another area where value for money and an eye on relevant issues is also apparent is in an insurer’s approach to jewellery losses. Jewellery prices have increased substantially in recent months and Sterling offers an enhanced jewellery replacement option to all high net worth customers whereby customers can receive a replacement item with an increased value of 20 per cent greater than the item insured (in addition to the 125 per cent extended replacement cover already provided to protect against the market value increasing beyond the sum insured).

A customer recently lost a diamond engagement ring insured for £44,000 (around $70,790) and chose to work with one of Sterling’s participating jewellers and obtained a replacement worth £52,800. While the loss was a traumatic experience the customer was pleased with the replacement piece.