Targeting HNWIs makes a promising business opportunity for insurers

17 Mar 2016

The high net worth (HNW) insurance segment is set to expand due to the increasing population and wealth of high net worth individuals (HNWIs), according to a new insight report from Timetric’s Insurance Intelligence Center. The report finds that there are significant opportunities for insurers targeting HNWIs. It remains an underpenetrated segment in terms of the amount of insurance purchased, as well as a lack of awareness about the potential benefits of insurance products catered to the segment.

HNWI landscape to create demand for the HNW insurance market

The HNW segment and its investible wealth continue to increase providing sizeable opportunity for the insurance industry. Expansion of the HNW segment and an increase in investible assets has direct impact on the financial services industry, including the insurance industry. According to the research from Timetric, the global HNWI population is expected to reach 19.8 million in 2018. North America still remains the largest HNWI market, with the highest number of HNWIs at 5.8 million in 2014. Furthermore, Asia-Pacific has emerged as a driving force for the global HNW market, registering a CAGR of 5.55% during the period 2010-2014. China particularly, exhibited exceptional growth in HNWI population and wealth at a CAGR of 11.17% and 19.14% respectively.

The untapped HNWI segment offers new opportunities for insurers

The more specialised nature of HNWI insurance products makes the returns in this segment higher than for normal insurance classes. For example, more complex life insurance policies such as Universal Life and private placement life products incorporate greater flexibility for clients and as a result more complexity. This more customised service will likely attract much higher premiums than standard policies in the market.

The HNWI segment, which is relatively untapped, may be even more attractive to insurers operating in large markets that have matured and consequently exhibit lower growth prospects. In the US and Europe, the wealth of these individuals is growing at rates between 4-7% per year, exceeding the rate of economic growth and the growth of many of the insurance markets in these countries.

Positioning insurance as part of wealth management

Despite emerging opportunities, the HNWI market is difficult to penetrate. This is due to a lack of awareness of these individuals and about the scale of the risk management benefits of insurance for a population with a portfolio of assets as vast as theirs. In addition, insurers traditional distribution channels are typically aimed towards mass market consumers and this can bypass HNWIs. Therefore, integrating insurance with the offering of wealth managers can be a valuable strategy for insurers, knowing that wealth managers have the contacts, trust and knowledge of HNWIs that would prove valuable to many insurers looking to enter or expand their operations in the market.

All information is based on the Timetric insight report: 'Insurance for HNWIs: Current State and Future Prospects'.

Source: Company Press Release