How Insurance Fits in Financial Management - Insurance Thought Leadership



June 11, 2018

How Insurance Fits in Financial Management


Few financial advisers address clients’ P&C needs—leaving clients exposed to significant gaps in coverage and out-of-pocket costs.

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There’s no better time than the present to shed light on an integral, yet commonly overlooked, aspect of financial planning: property and casualty (P&C) insurance needs.

New data from Chubb and Oliver Wyman finds that just 28% of financial advisers address their clients’ P&C insurance needs—leaving clients exposed to significant gaps in coverage and potential out-of-pocket costs. Yet, 77% of successful individuals want their advisers to provide this type of support.

This mismatch in expectations versus advisory services offered presents an opportunity for agents and brokers to build connections with financial advisers in pursuit of holistic wealth management strategies. Here’s how they can begin making in-roads.

Step 1: Articulate Why Holistic Wealth Management Matters

Advisers innately understand the importance of updating client financial planning strategies to respond to significant life changes—be it a new baby or new home purchase. But they often don’t know that failing to advise their clients to take the same approach with their insurance coverage can cost them millions.

Take Rick and Sue Smith. They recently moved into a new home and bought a backyard trampoline for their children but did not update their umbrella policy to reflect this purchase. One day, unexpected tragedy strikes—a friend of the Smiths’ children is injured while playing on their trampoline. Following a lawsuit, the Smiths must pay $2 million in damages.

Unfortunately, the Smiths’ standard umbrella policy only covers $1.1 million in liability—not including legal fees—and they’re required to pay the rest out of pocket. That means tapping into college savings and their nest egg. If the Smiths had an adviser who counseled them on insurance needs, they could have saved a substantial amount of money.

See also: The First Quarter in Insurtech Financials  

The unexpected will continue to happen, and it’s crucial that financial advisers ensure their clients are adequately protected. Helping them understand the P&C risk exposures their clients may face—many of which are often complex and difficult to grasp—is the best foundation on which to build a relationship.

Step 2: Explore the Roadblocks

Once advisers understand the role that P&C insurance plays in wealth management, the next step in the relationship is to help them grasp the three largest roadblocks that stand in the way of achieving holistic wealth management strategies.

First, many clients lack insurance products entirely or lack key coverages within the products they have. For instance, the Chubb and Oliver Wyman study found that, while most individuals have liability insurance, many don’t have high enough limits—similar to the Smiths. It was also shown that most Americans lack core insurance coverages, including for valuables like fine art (87%) or even flood insurance (76%).

Second, individuals who do purchase insurance often buy policies with the wrong features, largely due to using a standard carrier to cover their unique risk profile. As a result, these individuals could have an inadequate amount of coverage, overpay for features they don’t need or leave money on the table by not taking advantage of available discounts.

Third, and most importantly, clients are not receiving the right insurance advice from financial advisers. In fact, the same Chubb and Oliver Wyman research found that the driving forces behind sub-optimal client insurance protection is a lack of understanding of their risks and exposures, unpleasant prior experiences with insurers and little familiarity with insurance products.

No one expects financial advisers to become insurance experts. But, by understanding the core insurance challenges that clients face, financial advisers and agents and brokers can work together to build a holistic wealth management strategy tailored to each shared client.

Step 3: Explain the Business Benefits

Creating harmony between financial advisers and insurance agents and brokers doesn’t just benefit clients—there is also a business development case to be made.

As mentioned, more than three-quarters of Americans want their financial adviser to offer P&C support. If that isn’t convincing enough, 40% of successful Americans surveyed noted they’d consider switching to an adviser who does provide P&C support; 16% who would switch even if they had to pay extra fees.

See also: Why Financial Wellness Is Elusive  

There is clearly an opportunity for advisers to grow their business by working with agents and brokers (and for agents and brokers to increase their client base through referrals), while benefiting clients. The time for financial advisers and agents and brokers to act is now. Don’t wait.


About the Author

Ori Ben-Yishai is executive vice president and chief marketing officer, North America personal risk services, at Chubb. He oversees marketing and client experience for the personal lines property and casualty business that serves affluent and successful clients in the U.S. and Canada.

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