HNW cover prices under pressure from costs and exits

The contraction in specialist insurance capacity for the high net worth (HNW) market amid rising claims costs are some of the factors driving a long-overdue pricing correction in the sector. 

As insurers reassess the profitability of their high and mid-net worth books of business, the options are to hold firm on pricing while offering innovative products, or pull out of the market entirely. 

“I’ve been in the insurance industry for almost 20 years and I really feel that the landscape has changed quite dramatically in the last few,” said Guy Baxter, private client account executive at Lycetts. 

“We are definitely and finally moving into a hard market. We have seen several mid-net worth insurers pulling out of the market, or cutting back on brokers’ binders if the account is not performing well,” he said.

“I can just about remember the last hard market we were in, which is coming on for nearly 15 years ago now. It’s going to be quite interesting to see how brokers and insurers react,” he said.

Customers no longer accepting premium increases

He added that customers would no longer accept any increase in their premium, because insurance rates have been pushed down for so long.

“They all want it to be the same price or less. Everyone has been so used to calling insurers and brokers to get a better deal, but insurance rates really can’t go down anymore. They have to go up.

“The whole industry needs to support the rate increases that the insurers are trying to carry,” he adds. 

“Going into a hard market, it is more important than ever to have a strong relationship with your client and to be able to have the difficult discussions with them about premium increases, particularly if it’s the first one that they’ve had in a few years. 

“The good brokers should be able to hold on to customers and it will be a real opportunity in a hard market for them to shine or improve relationships.”

When MS Amlin exited the UK household market, serving mid- and HNW customers in June last year it rocked the market. 

The insurer, like its other Lloyd’s peers, was undergoing a review of underperforming business at the time and cited “challenging market conditions” as it placed the account into run-off.