Insurance Tells Us How the Millennial Elite Spend Their Wealth

Shifts in the demand for collections insurance policies reveal generational differences in what constitutes “valuable.”
By: | December 19, 2018 • 3 min read

Shifts in the demand for collections insurance policies reveal generational differences in what constitutes “valuable.”

High-value items like art, jewelry and fine wine will always have a place in homes of the high-net-worth, but younger collectors are increasingly turning their attention, and their investment dollars, to more experience-based items.

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“We are finding that with our Millennial or younger emerging wealth client, a lot of them are inheriting nice collections of art, jewelry and furniture, but often they are not insuring them because to them the value is either purely sentimental, or because they see these collections purely as investments and don’t have the same emotional tie to them as their parents did,” said Laura Sherman, founding partner of BKS Partners.

“Instead, our Millennial clients are more focused on experiences, and so they are collecting things that are more active and dynamic.”

That includes things like whisky, watches, collector cars, private boats and planes, and travel.

“Instead, our Millennial clients are more focused on experiences, and so they are collecting things that are more active and dynamic.” – Laura Sherman, founding partner, BKS Partners

“Watches are a big collection item with our younger clients. When you think about jewelry collections, you only bring out those pieces for special occasions. But a watch is something functional you can wear every day,” Sherman said.

Likewise, with collector cars, clients want the freedom to drive them whenever and wherever they please. Many coverages come with usage or mileage restrictions that limit actual driving of the car to the occasional Sunday drive, local parade or car show.

“Car collectors increasingly are asking for more flexible coverages so they can take their Ferrari Spider to work on a nice day if they want to,” Sherman said.

Coverage challenges also emerge for clients building collections of rare whisky and even craft beer. According to the Vintage 50 Index, the value of rare whisky has appreciated 140 percent over the past five years. A bottle of Macallan scotch bottled in 1986 but cask-aged since 1926 today fetches $1.2 million. Fine wine, by comparison, has appreciated 19 percent over the same time period.

Dramatic fluctuations in market value necessitate a review of coverage, or in some cases, motivate collectors to get coverage to begin with.

“We’re talking with our clients about how the market is changing and how we need to make sure the insurance has kept pace with those changes,” Sherman said. “With younger clients, that often includes educating them about the limitations of a homeowner’s policy. Millennials are really new to purchasing insurance and may not realize that they’ve outgrown the coverage available on a homeowner’s policy and need to add a collections policy.”

As collections grow and change, insurers will be pressed to adapt coverage. Not every underwriter can manage the flexibility Millennials desire for their collector cars, for example, and many won’t take on rare spirits collections.

Demand for coverage for private aircraft and large watercraft is also on the rise — again pointing to the value ascribed to experiences over ownership — as well as travel insurance.

So what else are high net worth Millennials seeking coverage for?

“I had one client looking to insure an expensive craft beer collection,” Sherman said. “That’s tough because beer doesn’t have much of a shelf life, so it’s not something insurers are very excited about.”

Demand for coverage for private aircraft and large watercraft is also on the rise — again pointing to the value ascribed to experiences over ownership — as well as travel insurance.

“Millennial clients are a lot more attuned to the fact that they’re not just walking around museums. They’re sky diving, wind surfing, white water rafting, mountain climbing, rappelling,” Sherman said. “They’re much more inclined to buy travel policies that will protect them.”

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The shared economy also presents new travel risks. “I’ve had clients rent a big house for vacation using Airbnb or VRBO and ask if they need to purchase coverage because they have to put down a large deposit, and they’re concerned if the rental turns out to be fraudulent or they can’t stay there for whatever reason that they’ll lose that money.”

Sherman also said that while coverage demand among older clients for traditional collections of jewelry, art, and antique furniture remains high, she’s also seeing the choices of younger generations rub off on their parents.

“Older clients are also expanding their collections to include things like watches and other experiential things as well,” she said. &

Katie Dwyer is a freelance editor and writer based out of Philadelphia. She can be reached at [email protected]

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