On Thursday 28th April 2011 the Royal and Sun Alliance (RSA Group) acquired the high value home business of Oak Underwriting from Sommerville in a move that surprised many but on scrutiny makes a lot of sense.
The RSA is a FTSE 100 company and one of the world’s leading multinational quoted insurance groups. It has a full multi-distribution capability, writing business through brokers and corporate partners, direct and online. And yet, despite all this it has failed to get a strong foot hold in the high value home insurance market, though not for the want of trying.
It had for many years its own high value home insurance product called Prime Choice, and it was an excellent policy. It may still have this brand but I am not aware of it as it has dropped off the home insurance radar. I cannot remember when the Prime Choice brand was mentioned by a customer, or specialist high value home insurance broker, of whom it had some loyal supporters.
If my memory serves me well RSA lost their broker support when they effectively disbanded their dedicated Price Choice underwriting centre, diluting the experience and knowledge base by relocating it to a “cheaper” part of the country. In short, it was a disaster for them and perhaps a lesson learned.
In Oak Underwriting (www.oak-underwriting.co.uk) they have acquired a business dedicated to the needs of high value home owners. In just over ten years, Oak have attained an enviable position as a market leader in this highly valued niche home insurance market by providing a product that high value home owners want, a service that specialist high value home insurance brokers demand (they do not distribute the product directly to the public) and back this up with the all important back end claims service, that keeps everybody happy and, ultimately, upon which any home insurance policy is judged.
On paper it is a good fit and, providing that RSA adhere to the old adage “if it ain’t broke don’t fix it”, I am confident that it will be business as usual for all parties, in turn, benefiting all.
There is a word of caution, however. In the late 1990s RSA entered into a joint venture with Chubb Insurance Company of Europe under the Masterpiece product. On paper, it was a good fit for both. The products were similar and both insurers wanted to make the great leap forward in market share of high value home business. But it was a relatively short lived marriage as the ethos of each company was completely different (somehow I am reminded of the Coalition government in this respect!) and they soon parted ways, with RSA taking a backward step in my opinion. I hope that they have learnt from past experiences.
Dovetail Insurance Services Ltd
Tel: 01242 699113
The big day for William and Kate, and for most of the country for that matter, is now over but some of you may be making your own arrangements for a significant celebration in the coming months. There are many things to arrange, some of which I will comment on in subsequent articles, but the one that most people forget is the gifts or presents that may be given.
Most standard home insurance policies will give little or no cover for gifts as it is a bit of a grey area. Technically, the person who has bought the item is the owner until it is officially handed over to the recipient, who cannot insure the item as they are unlikely to know its worth, or indeed even what the item is.
Fortunately, the high value home insurance companies understand this and all the policies that Dovetail Insurance Services Ltd promotes make provision in their cover for not only wedding presents but also birthday, religious or other celebrations. As an indication this is what is on offer from the high value contents insurance policies:
Oak Underwriting (www.oak-underwriting.com) – 25% of the contents sum insured for 30 days before and after the event
Elite Home – Temporarily unlimited with a specific restriction of £5,000 for jewellery and watches (if the gifts include items of jewellery or watches it is always best to notify insurers to clarify the cover they will give)
Sterling Executive Home (www.sterlinginsurancegroup.com) – £10,000 with a single article limit of £1,000
Aviva Distinct Home (www.aviva.co.uk/distinct) – 10% of the contents sum insured
Palladium Insurance (www.palladiuminsurance.co.uk) – £20,000 for one month before and after
J R Clare Lifestyle (www.jrclare.co.uk) – £10,000
These uplifts in cover occur automatically so there is no need to notify insurers but as each insurer offers different levels of cover, and periodically insurers revise their policy cover, it is always best to check before hand with your specialist home insurance broker, who can advise specifically what you have in place.
Dovetail Insurance Services Ltd
Tel: 01242 699113
There is a well known mass market insurance company that has just launched into the high value buildings and contents home insurance market. You will know the one that I mean by its distinctive red telephone adverts. When it launched it 1985 I had not yet embarked on my insurance career. That was another year away but by the time I had put on my first suit at a well known student insurance company, the Red Telephone insurance company, which I will now refer to as RT was already beginning to ruffle the feathers of the home insurance world.
Up until then you had to take out contents or buildings insurance through an insurance broker but now RT was offering an alternative by cutting out the insurance intermediary and speaking with them directly. It was a revolution, one which many of the traditional home insurance market was sure to fail.
But it did not. Millions of home insurance customers picked up their phone and ultimately switched either their contents or buildings insurance. Admittedly, there was only one home insurance quotation on offer, as opposed to the several that an insurance broker may provide, but if it was cheap as chips it didn’t matter to the consumer. The main brand home insurers had to ultimately follow suit and offer their contents and buildings insurance products directly to the public.
The downside for the consumer that it was a “tick box” underwriting mentality. If you gave all the right answers to the questions you were in. If you could not, or wanted to insure something a little bit out of the ordinary, then you had to revert back to the specialist home insurance market.
Some 26 years later, in early 2011, RT has decided that they are missing out on some quality business and have now launched their own product aimed at the high value home insurance sector. They have had to create a specialist high value home division with trained up staff, back up services such as a surveys and a product that offers the quality expected by a high value home owner, at a price that is attractive to them.
The latter is interesting to me because I am receiving more and more calls from RT policyholders, who are high value in terms of buildings, contents or both, who are not getting the required attention. In fact, I am pretty sure they are not even being referred internally to their high value home insurance division, but are being turned away by the call centre. It is, of course, my gain as a specialist high value home insurance broker.
It will be interesting to see if RT can make a success of their high value home insurance product, and part of me wishes them well because it is headed up by an old friend of mine from the student insurance days (the home insurance world is a small one). My big advantage is that I have a 25 year start on them in terms of high value home insurance and can knowledgeable speak with my clients. That will be the biggest challenge for them, the front end telephony, and only time will tell if they “select” the right people.
Tel: 01242 699113
It has been a musical start to 2011 with not one but three clients enquiring about high value insurance to cover a piano. In the first two instances the prospective clients had treated themselves to a grand piano and tried to add it to the home insurance policy but on both occasions the response they received was negative.
Both pianos cost in excess of £30,000 and this exceeded, by some margin, the single article limit allowed on their standard contents insurance. It was simply a case of “no” from their home insurer. This is a common approach from what I call the “tick box” home insurance companies that target the mass market and do not want to accommodate anything that does not suit their needs, rather than adapting to suit the needs of their clients.
I always find this a strange stance. Just what are the home contents insurance companies afraid of? Yes, it is one item of high value, but it is actually quite a good risk when you think about it. Firstly, no one is likely to steal it due to its size, even if they wanted to, which I very much doubt. And it cannot be taken outside the home so it poses no threat of loss like a high value item of jewellery, such as a ring or watch.
Indeed, the only real risks are fire, water damage and accidental damage. The latter two are likely to result in the need for some repairs and restoration, not a total loss. If there was a fire in the home, a total loss may occur, but then again all the contents would be at risk and the home insurance company would have that risk anyway.
The third client gives us an indication as to how the specialist home contents insurance underwriters view the risk. He described his piano as an antique, rather than a new one, and thus the specialist home insurances charge a premium rate much lower, knowing full feel the risk exposure they had was as described above. In fact, they provided a high value home contents insurance quotation for the two new Steinway pianos also.
To summarise, the standard home insurance policies considered the pianos to be high risk whilst the specialist home contents insurance policies considered it to be low risk. The former said “no” without hesitation and the latter said “yes” without hesitation, going even further and charging a low premium rate for the high single item.
This approach from the high value contents insurance companies extends to other high value single items, or collections, such as pictures, paintings, antique furniture, statues, bronzes, to name just a few. I have even arranged a quotation and cover for a high value telescope kept in the garden to my clients to star gaze in the last few weeks.
So when your home insurer says “no” or does not understand what you need your home insurance policy to cover, think about the specialist home insurers who can normally accommodate most high value items within a buildings and contents home insurance policy.
Tel: 01242 699113
Today, the amount you will have to pay for your high value home insurance will increase. Not because you have made a claim or increased the amount of cover you need but because the Coalition government has decided that you should.
The rate for Insurance Premium Tax increased today from 5% to 6% and will apply to all home insurance policies that have an inception or renewal date from now onwards. If you home insurance policy is not yet due for renewal you will not pay any more until it falls due, and then it will be unavoidable.
This increase not only applies to the buildings or general contents of your home but also the insurance of any collections, fine art, antiques, etc that you have attached to you specialist home insurance package. In the scheme of things, it is probably not a huge increase, the first since the flat rate of 5% was introduced by the government at the time in the mid 1990s. But is does all add to the cost and equates to £10 for every £1,000 of premium that you pay.
If you also have Annual Travel insurance attached to your high value home insurance policy you will pay even more. Annual Travel insurance has always been charged at a much higher rate than (general) Insurance Premium Tax. It was 17.5% but has simultaneously been increased to 20%.
There will be a third, virtually unseen increase in your annual high value home insurance premium as the rate of VAT has also increased to 20% today. How is this relevant to high value home insurance?
Well, virtually every home insurance company does, or at least should, index link the contents sum insured each renewal. This is usually based on the Durable Goods Index, although not always, which in turn is based on the cost to replace such home furnishings and the like. As these will increase in cost due to the VAT increment so will the monthly index linking figure automatically applied to you high value home insurance, although this is only usually applied to the general contents section and not necessarily any extensions in respect of paintings, antiques, collections, jewellery or watches.
Similarly, the buildings sum insured should be linked to the Re Building Cost Index published monthly by the Royal Chartered Institute of Surveyors, which will also be, in turn, affected by the increase in the VAT rate, reflecting the increased cost of materials and the labour required to repair the buildings of you home following damage.
Taken separately, the individual increases would probably not be noticed my the majority, but the combined effect of all three may make many take a sharp in take of breath when their renewal notice lands on the mat through the post as 2011 progresses. It will be a good time for you to check that your high value home insurance still offers good value for money. But I would say that wouldn’t I?
Tel: 01242 699113