Covéa sets out recipe for HNW insurance

When they were both struggling novelists in Paris in the 1920s, F Scott Fitzgerald said to Ernest Hemingway: “You know, the rich are very different from you and me.”

“Yes,” replied Hemingway in typically blunt fashion. “They have more money.”

And as the high net worth team at Covéa Insurance knows, that means the rich have very different insurance needs from the rest of us.

Take escape of water.

For most of us that means some floor damage, ceiling damage in the room below, some furniture replacement and a bit of plumbing and electrical work.

How very different for one of Covéa’s HNW clients, as told by Garry Simmons, head of HNW and commercial claims at Covéa Insurance.

Woken up in the small hours by a series of crashes and explosions, the client went downstairs to find chaos and devastation running into the millions.

One of those fancy fridges that gives you chilled water and ice on demand had sprung a leak. The water had seeped into the plant room in the basement where the brain of the house controlled all the connected technology providing room to room audio, TV, aircon, automatic lighting and heating and everything else that money can buy for a modern house. Short circuits fried all the systems, caused ceilings and floors to collapse and ruined the basement.

For the modern HNW family living in a townhouse, the newly-excavated basement is often the most valuable part of the house. And in this house there was a home cinema, a games room, a gym and a swimming pool.

All-but impossible to get to and all-but impossible to repair.

In cases like these, according to Simmons, it’s sometimes easier – and cheaper – to pay for the family to go away on holiday than it is to put them up in appropriate temporary accommodation while the complicated and expensive repairs are under way.

In one case, Covéa paid for a family to go to St Lucia for a month while repairs were carried out to their home.

A large proportion of HNW claims are cashed out, says Simmons.

In another case, a small fire in a customer’s utility room caused smoke to be sucked through the air conditioning system, causing smoke damage in every room in the house.

As the aircon system, like every other high tech system in the house, was built-in to the fabric of the house and hidden behind plaster, repairs would have been lengthy and expensive.

“It was cheaper to knock the house down and rebuild it,” says Simmons.

“The difference in cost was the VAT,” he says. You pay VAT on repairs, but not on new builds.

Prevention is just as important for HNW clients as it is for the rest of us – especially as the cost and scale of claims can be so huge, according to Covéa Insurance’s head of high net worth Sara Simmons.

(And yes, she and Garry are married.)

That’s why Covéa Insurance has teamed up with Homeserve to fit LeakBot smart water leak detectors in clients’ homes.

Aviva, RSA and Legal & General have all previously signed up to LeakBot for their home insurance schemes.

Confirmation of the LeakBot deal comes after Covéa ran a pilot scheme under which the insurer absorbed all the cost of any callouts or claims that arose from LeakBot alerts, including any leaks caused by wear and tear or poor maintenance.

According to Sara Simmons, about 80% of the firm’s HNW business comes via the broker channel, with the remainder made up of strategic partnerships with John Lewis and Lloyds Banking Group and schemes with Towergate, Brokerbility and Highworth.

“We see brokers as integral to the whole process,” she says. “We’ve always placed importance on the relationship with our business partners. The focus is on the intermediated side of the business.”

That focus has paid off in terms of Covéa Insurance’s relationships with its broker partners.

Covéa acquired HNW insurer Sterling in 2015, and completed the integration of the business at the start of 2016.

Sterling had a stellar reputation with its broker partners, as evidenced by its rankings in the annual Insurance Times Broker Service Survey.

In personal lines, Sterling had come top of the rankings for the two years before the switch into Covéa. In commercial lines, it had come top for four years running.

It would have been understandable if the firm’s BSS rankings had slumped following the takeover. After all, it’s not uncommon for businesses to suffer a blip in performance amid the distractions of integration, with the changes of management, structure, personnel and culture that normally follow an acquisition.

In commercial lines, Covéa did see its position slip slightly to third in 2016. And back up to second in 2017.

But in personal lines, there was no question of Covéa taking its eye off the ball, and it has maintained its pre-eminent position in the affections of its broker partners, now topping the poll for four years in a row as both Sterling and Covéa.

“Covéa’s values are the same as Sterling’s, but maybe done in a different way,” Says Sara Simmons, who has worked through the integration period.

She points to the benefits of being in a larger group, like better infrastructure behind the business, a bigger regional spread, more robust financial support, and being part of an A-rated company.

She says that Covéa’s mutual ownership lends itself to a longer-term approach to business.

Also, she says, Covéa’s backing helped the team move into motor.

“Sterling always struggled with motor,” she says, and the first thing the team did after the takeover was develop a family fleet product covering vehicles valued up to £200,000.

Covéa came in at just the right time,” says executive motor manager Barry Knight. “Covéa was the enabler that provided the backing for motor.”

According to Barry, the £200,000 per car limit allows Covéa to cover HNW customers’ vehicles without straying in the specialist area of supercars.

“It’s okay for Bentleys and Porsches, but not for Lamborghinis or Zondas,” Knight says.

National HNW underwriting manager Alison Colver says the key to HNW is down to “service and product and claims proposition.”

But she adds that the HNW sector is just as vulnerable to considerations of price as elsewhere in the market.

“There’s a lot of pressure on premiums, with IPT, the Flood Re levy, Ogden. But customers don’t understand or really care that it’s not the insurers putting up the premiums.

“More and more clients are shopping around and more and more brokers are being asked to re-broke,” she says.

“It used to be that clients would look around every three years. Now it’s more on an annual basis. There’s a lot more emphasis on getting the best deal.”

To counter that, Covéa and its broking partners have to demonstrate to clients that HNW insurance is about much more than just price.

“We have to make sure we get the message across to the client that they’re getting a fantastic claims service,” she says.

“If clients get fixated on price we have to get them away from price and explain that it’s about bespoke underwriting, flexible underwriting and levels of service.”