Insurers mine rich seam of SA’s burgeoning elite
Economic performance might be flagging, but growth in South Africa’s wealth market is among the most vigorous in the world - so vigorous that insurance for the ultra-wealthy is a thriving business.
Whether their clients have family heirlooms, solid gold bathroom mixers, Louis Vuitton handbag collections, or luxe home technology, insurers are optimistic about growth in this market, which offers enormous potential.
Last year’s AfrAsia Bank South Africa Wealth Report described the Durban, Ballito and uMhlanga corridor as the fastest-growing wealth market in South Africa.
A spike in investment has led to this region now homing more than 3300 high-net-worth individuals, who hold more than $1million (R14.8m) of investable assets, and 210 multi-millionaires, who have $10m or more of assets.
High-net-worth individuals are defined as people with investable assets in excess of $1m - excluding a primary residence, collectibles and consumables.
Christelle Colman, the founder of Elite Risk Acceptances, a division of Old Mutual, says South Africa has seen double-digit growth in the number of dollar millionaires.
“It’s a sad fact, but the gap between rich and poor is getting far bigger. We have five homes on our books worth in excess of R100m.
“The most expensive home is R350m - that’s just the buildings. People are spending mindboggling amounts on jewellery, whisky collections, exotic cars and art.”
Launched in August 2018, Elite’s premium income in one year was more than R100m. Colman, who has worked in this segment for 25 years, expects it to reach R300m this year.
Lane Alberts, the national manager of private client services at insurer Marsh Africa, describes growth in the high-net-worth individual sector as “heartening”.
“It’s surprising to see the numbers of wealthy individuals relocating to South Africa,” Alberts says.
“Our business grows from that. We see more wealthy people coming into the country than leaving. They bring their families and their assets with them.
“There are 40-year-old-plus executives finding work here in key positions.”
As their earning potential increases, they buy more expensive vehicles, more properties, and add to their stockpiles of art and collectables.
Specialist insurer MUA Insurance Acceptances was one of the pioneers in the industry by offering specialist underwriting for vintage cars. Founded in 1988, it has become a leader in tailoring insurance solutions for the discerning short-term personal lines market.
Michelle Ashen, the head of brand and marketing at MUA, says: “We’re living in a country where many entrepreneurs and dollar millionaires are not assessing their risk - they don’t pay attention to their property.”
She says in this segment there’s strong demand for customised cover.
“Vintage cars appreciate in value. Some cars have accessories that exceed the cost of the vehicle. Our brokers ask questions that the customers don’t necessarily know to ask. Our clients expect discretion and a bespoke service.”
Wealthy clients are passionate about their hobbies, investing much time and money in their interests. Insuring a classic car is a specialised undertaking, requiring complexity and skill, which is why the relationship and trust between brokers and insurers is so vital.
Ashen says MUA is increasingly turning its attention to the up-and-coming “black diamond” market.
Colman says an encouraging trend is that Africans from across the continent are buying locally.
“They need to insure their fixed assets, their collections of wine, handbags, whisky and even Louboutin shoes,” she says.
“We do a full valuables risk assessment. We have to be proactive about this. There’s no average benefit - we have an agreed value policy, so there’s never underinsurance.
“We also settle our claims in cash. We don’t try to force our clients to replace their rare diamond ring with something from a local jeweller.”
Legacy Underwriting Managers chief executive Christo Crafford says the ultra wealthy are not concerned about losing a Gucci handbag, cellphone or even a house. Their focus is on creating multi-generational wealth.
“At Legacy we have some ultra-rich clients, but our focus is on building growth and retention.
“What we like to see is a normal person increasing their wealth over decades.
“Our underwriting accommodates them and gives them service that matters.”
He says this is where the role of the experienced insurance brokers is essential, because they focus on helping clients to structure their insurances correctly to save time and give them peace of mind.