The global population of high net worth individuals has been growing over the last several years, according to numerous studies, and this trend is expected to continue. According to a report on data through 2014 from financial consultancy Capgemini, the worldwide population of millionaires grew by almost 1 million in 2014, thanks to strong equity market growth and other favorable economic factors. High net worth clients residing in North America in particular were found to comprise most of the global market, with their total wealth pegged at $16.2 trillion. While the global economy hasn’t seen exemplary growth since, high net worth individuals are hanging onto their assets and investing wisely enough to remain a force in the financial world.
With such a high volume of assets under management, high net worth clients are also a promising demographic for life insurance. However, just as with any other investment, high net worth clients require special consideration when it comes to life insurance products. Tapping into the high net worth market could be a major boon for financial professionals, provided they have the right knowledge and expertise to successfully handle big-ticket clients.
“HNWIs are more interested in life insurance than ever before.”
The idea that life insurance could be a useful tool for high net worth clients did not become widespread until relatively recently. According to a report on the high net worth insurance market, RGA International noted that using life insurance to leverage estate planning and asset management benefits was not typical until around the mid-1990s. Since then, the market for life insurance products aimed specifically at high net worth clients has become much more competitive. This necessitates a unique value proposition and marketing strategy for any firm that wants to differentiate itself in this realm.
Of particular importance to financial professionals marketing to high net worth individuals is the utility of a universal life insurance policy. While universal life can be a more daunting prospect for the average consumer, high net worth clients are particularly advantaged to reap numerous benefits from the right universal life plan. The sizeable benefits paid out from these plans, along with the ability to withdraw and borrow against invested premiums, make them useful in estate planning for many high net worth clients.
How to attract, retain HNW clients
To consistently attract and retain high net worth clients, advisors need to stay up to date with life insurance pricing and underwriting strategies. As an example, a 50-year-old male in good health can expect to pay a lump sum single premium between $1.8 and $2.5 million for a guaranteed $10 million universal life insurance policy. Knowing the average headline premiums and judging based on this factor is a major part of choosing the most effective life insurance product for a high net worth client.
Advisors should also be aware of underwriting practices and look out for their clients in this regard. RGA noted that high net worth individuals are accustomed to a certain quality of service, which they deemed “white glove.” That means insurers with solid timelines and practices for underwriting policies will increase overall client satisfaction, and thus an advisor’s ability to retain a client. It’s important to be as upfront with clients as possible when it comes to discussing the particulars of a new policy, including how long the underwriting process will take and the nature of any required financial disclosures.
Another crucial part of evaluating any insurance provider is researching their underwriting appetite. RGA defines this as a two-dimensional scale that operates as a function of an insurer’s acceptance rate compared with the amount of evidence they require. It’s obvious that some insurers are more risk-averse than others, and have a higher rate a rejection than some. Insurers also vary in their propensity to request multiple medical exams or details on a client’s financial history. Some clients may not worry about how much work the underwriting process takes, while some may be very sensitive to this. Financial professionals looking to establish themselves as real team players should do as much research as possible into an insurer’s underwriting appetite before signing a new client up.
Despite their similarities as a part of the market segment, of course, each individual high net worth client has his or her own unique goals and perspectives. Advisors who can work with these challenges will be rewarded in a dedicated client base and regular referrals.