The global high-net-worth individual (HNWI) population has increased by 5 percent so far in 2016 to 16.6 million, with total global HNWI wealth increasing by 4 percent to $58.7 trillion, according to Capgemini’s 2016 World Wealth Report. As this segment continues to grow, it is also changing significantly.
Executive SummaryDigital innovation combined with traditional service will help agents and brokers keep high-net-worth clients, according to Valerie Monet, a director in J.D. Power’s Insurance practice.
In the first quarter of 2016, half of the world’s HNWIs were 40 years old or younger. Millennials have already changed the way companies market their products to consumers and reshaped buying and selling channels. As younger affluent professionals increase in number and represent a more significant proportion of the global HNWI population, this will have several significant implications for financial services and insurance companies that hope to retain or acquire them as customers.
Older HNWIs prefer concierge service. Among older, more affluent homeowner insurance customers, 43 percent have contacted their agent at least once during the past 12 months, the J.D. Power 2016 Household Insurance Study noted.Half of these individuals have never visited their insurer’s website—making them entirely reliant on people in advisory roles that represent the insurer.
A stronger digital presence is much more important to younger affluent customers, with 47 percent having visited their insurer’s website in the past year, according to the J.D. Power study. They have a much stronger stated preference for self-service digital interactions. More than 2 in 5 younger HNWIs prefer digital interactions for activities related to billing, renewal, information gathering, making and verifying payment receipt, updating contact information, and verifying account changes. As a point of reference, 50 percent of older affluent customers still turn to an agent or advisor to help them find general information.
Outside of the insurance industry, we also see this shift toward digital. According to Capgemini’s World Wealth Report, 33 percent of HNWI wealth was essentially liquid, held in bank accounts or as physical cash, compared with 32 percent that was overseen by wealth managers. Under-40 HNWIs were even less likely to turn to wealth managers, at 28 percent. The migration to self-service online tools isn’t just observed among customers. In 2015, wealth managers also asked their firms for more digital capabilities. Collectively, this creates significant pressure on firms to improve their digital capabilities or risk losing profits, clients and staff, the Capgemini report said.
Digital, With a Personal Twist
Despite the increased propensity to interact through digital channels, younger affluent customers are still looking for a trusted advisor. Among homeowners insurance customers, younger affluent customers interacted with their agents more frequently during the past year compared with older affluent customers—49 percent vs. 43 percent, respectively, according to the J.D. Power 2016 U.S. Household Insurance Study. Consumers tend to lean on an expert for certain activities—typically those related to a significant monetary investment. J.D. Power research has found that in times of stress, such as an auto accident, agents can play a significant role in improving the overall experience (J.D. Power 2015 Auto Claims Study). In addition to advocating for their clients, agents frequently bridge the lines of communication between the insurer and the customer, playing a key role in setting expectations and educating customers.
For individuals with a home insurance claim, there are some activities that have a greater impact on customer satisfaction for more affluent customers: receiving an explanation of how long the process will take; taking the initial claim report in 15 minutes or less; and having four or more activities conducted on their behalf during the first-notice-of-loss call.
In some instances, failure to meet expectations on such items can be even more detrimental to affluent customers’ overall experience working with the insurer, as their service expectations are higher, according to the J.D. Power 2016 U.S. Property Claims Study.It is unlikely that digital platforms will replace the desire customers have for a trusted advisor, particularly when it comes to managing their wealth and their most costly assets. However, there is an opportunity for agents and advisors to more efficiently engage with HNWIs by embracing some of the same technological innovations these customers have already embraced themselves.
Insurers Fall Behind Blending Technology With Traditional Client Interaction
Unfortunately, few insurers have been actively developing the capabilities that have the potential to reshape customer interactions through more traditional channels. As consumer needs change and digital expertise matures, more innovative use of technology in conjunction with traditional interaction channels will become a standard in the business world for companies wanting to remain competitive.
Financial advisors, agents and brokers should work with companies to develop distinct products and services based on customer needs, which can enable them to provide more fitting recommendations at the beginning of the relationship.
Further, new tools need to be developed to provide goal-based advice throughout the customer life cycle. Companies at the forefront of developing new technologies to align with and improve their existing business model will be the industry leaders of the future.