The non-life insurance sector is undergoing significant shifts that will impact the affluent market and their insurance needs in 2024.

This is the view of Tarina Vlok, MD of Elite Risk Acceptances, a specialist high-net worth insurer and subsidiary of Old Mutual Insure.

“We are seeing that the sluggish economy is leading to frugality, meaning that while high net worth individuals have the means, they are choosing to acquire fewer, but higher quality possessions,” says Vlok, adding that there has been notable growth in the second-hand luxury market with a focus on sustainable and responsible shopping. “This presents an opportunity to provide specialist, niche insurance to cater for these high-end items.”

Insuring luxury and high-end goods correctly

She says against the current environment, the affluent need to ensure that these are appropriately and sufficiently insured at their replacement value, and not their acquisition cost.

“There is also likely to be continued investment in alternative asset classes like classic cars and high-end jewellery, especially watches. But given that we are still experiencing the tail-end of COVID-19 supply disruptions, where these items are not readily available for replacement, there are risks to acquiring unique, expensive items,” says Vlok.

One such risk is the possibility that if a second-hand item, which may be bought with an inflated and hefty price tag, is stolen, and ownership cannot be validated, then the insurer will not be able to honour the claim.  “There is also the risk that a replacement is not readily available.”

Similarly, she says that as the rich choose specialised and eco hobbies, such as bird watching, catch and release fly fishing, photography or anything else that requires equipment, clients can be left out of pocket if they are not sufficiently insured. “Don’t be tempted to undervalue these items.”

Semi-gration and emigration

The ongoing rise in semigration risk offers an opportunity for growth in previously underserviced areas, specifically the Whale Coast, Western Cape Winelands, Garden Route, and West Coast. Vlok says this presents a chance for individuals to acquire assets in smaller, safer environments, with the safety and security of their families top of mind.

“However, acquisition of properties in eco estates in remote areas can create challenges for clients when it comes to reinstatement. There may be few service providers in the area and the industry may need to get creative when it comes to claim reinstatement,” says Vlok.

She says if clients have properties in countries outside RSA, they need to be insured with local insurers and preferably obtain advice from local intermediaries. She says it is an increasing trend that HNWI are leaving goods for years or more in their overseas properties, and when the unforeseen happens, it does not mean insurers based in SA can honour these claims.

“If clients send their children overseas, it is important to ensure that their children’s possessions are insured in that country. Local insurers are not able to compensate for losses in these situations. There is a difference between items taken with you when you go overseas for business or travel, and items kept there for an extended period for temporary residence or study,” explains Vlok.

Going off the grid

Vlok says that the South African infrastructure demise is leading to even more alternate power installations, and this is an opportunity for both clients and insurers.

“Clients can effectively negate the cost of electricity by going off the grid, also ensuring continued power supply. They will also very likely add significant value to their property. The risks associated with incorrect installation are vast, and clients need to ensure that all their backup and alternative power generation installations are done by experts with the appropriate qualifications and accreditations, who can provide the correct certificates of compliance,” says Vlok.

She expects this trend to continue in 2024 especially as loadshedding continues unabated. “We cannot stress enough the importance of expert installation of backup and alternative power generation systems.”

The advent of AI, and an increase in cybercrime

Another trend, especially in the current economy, is the increase in fraudulent activity, especially as online transactions continue to increase. The shift to remote and hybrid work models has also increased the vulnerability of businesses to cyber threats.

“It is prudent to be alert and aware when interacting or transacting online. We see too often that clients are looking at their non-life insurers to compensate them for financial losses incurred through cybercrime. There are specialist cyber products available, but not all insurers have the appetite for these.”

She says for insurers, it presents an opportunity to enhance the client experience and refine fraud models. Embracing AI technology correctly through bots for example can bring immense benefits to the client, who has an expectation that any reduction in benefit must equal a reduction in price.

“The non-life insurance industry is navigating an environment characterised by heightened risk and persistent uncertainty. Given these trends, a comprehensive approach to wealth management and risk mitigation within the affluent sector must be seriously considered,” Vlok concludes.

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