Hikes in Insurance Rates Mean Ultra-Wealthy Must Get More Serious About Personal and Family Risk

Family enterprise owners and their executives generally do a superb job managing risks to the business–but often don’t apply the same rigor when it comes to family and personal risk. And recent substantial hikes in property and casualty insurance rates should prompt a needed spotlight on assessing and managing personal risks annually, according to executives at Alliant Private Client, which manages the insurance needs of affluent individuals and families.

The firm’s Family Enterprise Risk Index, a recent survey of leaders of ultra-high net worth family enterprises, revealed that 86% handle risk management planning at the highest levels of the business–but that 76% have no regular or systematic annual review process for the family itself. Of those that do, only half said they go as far as to align the family’s insurance strategy with its risk exposures.

“These findings illuminate why the personal insurance programs of ultra-high net worth families are often overlooked, despite the need to contend with a much tighter, more expensive insurance landscape,” said Linda Bourn, Senior Vice President and Family Enterprise Risk Practice Leader at Alliant Private Client.

The personal insurance market is more challenging than in recent memory due to a range of variables, including the frequency and number of natural disasters over recent years (coupled with their cost of destruction), crumbling infrastructure, and skyrocketing rebuilding costs, according to Bourn. This has made it harder to secure insurance, given rising non-renewals, increasing premiums nationwide, and carriers reaching capacity. Home insurance rates are expected to jump over 7% in 2023–following a 12.6% hike in 2022–and car insurance is expected to rise more than 8%, based on data from S&P Global Market Intelligence and ValuePenguin, respectively.

“Because of inflation, scarcity, and rising cost of materials as well as a host of other macroeconomic factors, property and casualty insurance rates have risen fairly dramatically across the board, throughout the country. Moreover, we have seen more carriers opting out of certain lines of coverage,” said Bourn.

“Insurance is often viewed as a commodity, which can lead to over-paying and inadvertently making costly decisions, or not making insurance decisions that adequately protect the risks of the family,” she said.

The Antidote

“The overarching solution for affluent families facing a tougher insurance environment is to take the time to really understand what they’re insuring against–and move away from thinking about insurance as a commodity. Collectively, the families, their insurance professionals, along with their trusted advisors or executives within the enterprise, should strategically pick and choose what to insure against and how much coverage the family really needs. This knowledge will enable families to offset some of the costs of insurance by intentionally assuming more risk to better manage pricing in this environment. That entails delving more deeply into the details and fine print of policies and options available,” said Cindy Zobian, Executive Vice President and Managing Director at Alliant Private Client.

Zobian pointed out that with regular, detailed reviews of insurance, families can absorb a range of important information. For instance, they may learn that their homeowners’ policy doesn’t cover jewelry. And they may also discover that it’s less expensive to insure custom furnishings and antiques as fine art than it is general content. With that knowledge, they can determine what they need and don’t need in terms of insurance–and can arrive at options that are suitable and customized for them.

A number of factors make it important right now for ultra-high net worth families to take a more analytical approach to insurance, engage with the right professionals, and make it part of their annual risk assessment and planning.

“Given the cost of inflation and the likelihood of the challenging insurance landscape continuing, ultra-high net worth families should consider partnering with a risk and insurance professional to address family risk resiliency,” said Bourn.

About the Family Enterprise Risk Index

The Family Enterprise Risk Index was a joint effort by Alliant Private Client, Center for Applied Research (CFAR), Cornell University Smith Family Business Initiative, and YMG.

About Alliant Private Client

Alliant Private Client is a division of Alliant Insurance Services, a leading distributor of diversified insurance products and services. Their national strength and reputation for excellence is the product of a highly experienced team with unrivaled insurance expertise. They craft customized insurance programs for affluent individuals and families who require a sophisticated approach to personal risk management. Alliant Private Client’s elevated technical knowledge and market relationships allow them to deliver the best holistic programs for their clients. They have offices located around the country, 200+ professionals licensed in all 50 states and a 24/7 dedicated claims department. Visit us at alliantprivateclient.com.

About Alliant Insurance Services

Alliant Insurance Services is one of the nation’s leading distributors of diversified insurance products and services. We operate through a network of specialized national platforms and local offices to offer our clients a comprehensive portfolio of solutions built on innovative thinking and personal service. The business of managing risk is getting more complex, and Alliant is meeting this complexity head-on, not with more layers of management, but with more creativity and agility. Alliant is changing the way our clients approach risk management and benefits, so they can capitalize on new opportunities to grow and protect their organizations. Visit us at alliant.com.

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