Lorega in the News
Publication: Brokers’ Monthly
Author: John Sims
Job Title: Chief Executive Officer
Date: 25/03/08
Having been away from the high net worth (HNW) sector for the last twelve months the break has given me a chance to take a fresh perspective on HNW and the challenges facing the specialist brokers.
For brokers looking at HNW there is no doubt that it is an attractive playground as it is less vulnerable to competition than the mid net worth. The top end of the market is far more advice driven than price driven. That said, brokers should not assume rich people want the best at any price; what they want is value for money. They want quality at the right price and are used to getting value for money in every other aspect of their life. Potential HNW clients are therefore susceptible to being moved from viewing insurance as a pure commodity to paying more because they want quality and value for money.
Take this analogy for example; when DVD players came out I knew nothing about them. So I went into Comet and asked the young salesman to first explain the price range. He said £99 – £500. I then asked HIM if he were spending £250 which machine he would buy. He pointed out two and explained the benefits of both and I made my selection based on that. All I wanted was some advice to inform my decision. In this case I felt I was getting a quality product which wasn’t ridiculously expensive but wasn’t so cheap it was a false economy.
This demonstrates the importance of getting quality and value but also reminds us that there is a limit to which people will pay over and above for quality. If they can obtain a household policy direct for £1000 they will not pay £2000 but they may pay £1200 or £1300.
The other historic stumbling block for brokers in cracking high net worth is marketing. Brokers can all too easily be put off marketing because of the huge campaigns by direct players. But by this many are missing the benefits a targeted and inexpensive community-based campaign could have.
For example as a broker my firm sponsored local football teams which cost £300 a year for shirts with our logo. Brokers may well say how does that really help my business? But the key to marketing is not to talk about insurance in the beginning but gradually build profile. This could be sponsoring a local theatre or a school event. Also look for opportunities that are charity based or local schools – things that add tremendous value but which are totally underfunded. Of course with charities there are obvious tax advantages too. It is often the case in independent brokers when there is just one person with an interest in marketing they do really well out of it.
Another issue for brokers breaking into HNW is the fact that, in a lot of firms, relatively inexperienced account handlers look after the insurances of mega rich individuals. But how can they really advice them? Most board members of brokers have Hiscox or Chubb policies so training less experienced staff would enable them to give potential and existing clients greater confidence.
Yet another old chestnut that hampers brokers with HNW is cross-selling. Many remain poor at this but simply putting commercial and personal account handlers together can be incredibly powerful. Because account handlers can live in their own silos and are so focused on what they do the customer often doesn’t even know about other insurances the broker can offer. Try putting a good private client sales person among the commercial team and incentivise the team to cross sell. You’ll be surprised how effective that can be.
One broker recently sent a flyer depicting a badly flooded factory with text of a case study to personal clients that did not do commercial insurance with them. It cost £250 for 1000 fliers and he picked up 10 new commercial leads from it. And this could easily be done for commercial clients telling them about personal lines.
Brokers can be nervous that they cannot see when they will get a return on investment for this kind of marketing. As a young broker myself many years ago I’d write a generic sales letter to local businesses, post them through their letter boxes on a Sunday afternoon and sit at my desk like a lemon on Monday morning and wonder why no one had rung by 10 o’clock! However I found if I did that half a dozen times people did eventually call.
So with much of these things it is very much planting the seeds and remembering people do not always need your service at the point you tell them about it. If brokers lay these seeds and train the staff, when the leads come in their chances of securing the business will be dramatically enhanced.
