High Net Worth

7 Crucial Risks Facing High Net Worth Families

From cyber risks to global travel, high net worth families have a host of risks to manage.
By: | June 26, 2018 • 3 min read

High net worth (HNW) individuals and families face many risks due to their complex lifestyles. The wealth they have accumulated makes their property and casualty exposures more complex than the average consumer, and their risks oftentimes rival those of a business in scope.

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The frequency and complexity of the risk exposures faced by HNW families and individuals make it necessary to adopt proactive risk prevention strategies, as well as the purchase of insurance protection to make them whole should they suffer a loss.

1) Cyber Crime

The use of technology and social media, the number of connected devices per household and the number of people (staff, advisers) communicating with HNW individuals make them prime targets for cyber crimes.

These crimes include email phishing, ransomware and unauthorized bank transfers. While the insurance industry is starting to offer insurance protection for some of these losses, the best defense is practicing good cyber hygiene.

2) Catastrophic Weather Losses

Hurricanes, flooding and wildfires will continue to impact HNW families since many of them own homes in disaster-prone tropical or mountainous regions.

Traditional risk identification tools such as FEMA flood maps are outdated and do not accurately reflect risk. In recent years, we’ve seen unprecedented flooding in areas that have never or rarely been flooded before. These extreme weather events will continue to impact the HNW.

To prevent losses, families and individuals must work with professionals who can provide more advanced risk identification resources, as well as resources to help prevent or mitigate losses, such as hurricane and wildfire protective services.

3) Collections Management

HNW families and individuals are known to have a passion for collections, such as art, furniture, memorabilia and cars. Many collections are a significant asset class in their financial portfolio and are managed aggressively to increase value, which may mean the collection is on exhibition or on loan to museums and galleries.

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This increase in risk exposures requires specialized risk management solutions.

A good example of how specialized risk management solutions comes into play took place after the California mudslides — coverage was afforded for some who had specialized fine art insurance versus traditional homeowners’ coverage where mudslides are not typically covered.

4) Employee-Related Risks

HNW families hire employees who help run their households. These individuals range from nannies, caretakers, captains and crew, to housekeepers and assistants.

Employees bring about risk exposures related to on-the-job injuries and employment practices liability exposures. HNW individuals need to adopt the same stringent hiring practices that a business adopts when hiring and terminating employees.

Practices should include background checks, onboarding protocols, regular performance reviews and the like.

5) Security Risks

Security at home and during travel — including the risks of terrorism and global conflict — also remains a top concern.

Security concerns can range from home security alarms and devices to worldwide travels concerns.

For families with complex risk exposures, consulting with a security expert is recommended. These experts provide a full risk assessment that would minimize any security breach, such as a home invasion, a cyber breach or any other issue that could put the family at risk.

6) Professional Liability

Many HNW individuals hold board positions on for-profit, nonprofit and not-for-profit boards, yet the majority of individuals do not know if they’re protected with professional liability coverage.

If they know coverage is provided, the majority do not know the policy limits or terms and conditions. It is imperative that anyone who holds a board position understands their personal risk exposures and the insurance protection available to them.

7) Ownership of Assets

HNW individuals tend to own assets in the names of trusts, LLC and other legal entities. It is critical that they understand the ownership structures of all assets and that all insurance policies are coordinated to properly cover all necessary policies. &

Lisa Lindsay is the executive director with the Private Risk Management Association (PRMA). She was instrumental in establishing PRMA and played a key role in developing The Chartered Private Risk and Insurance Advisor (CPRIA) certificate. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]