New vulnerabilities and protection needs

We Wealth | September 2020

When it comes to raising awareness on the importance of self-protection, preservation and future thinking, the pandemic and the 100 days in lockdown have done more than decades of communication and marketing activity ever did.  

Let’s consider some data: in May, 27% of Italians intended to contact an insurance company over the next few days (as compared to 12% in January).

In January 2020, only 10% of Italians were interested in taking out health insurance. In May, the number registered an increase, reaching 34% (Source: FINER Finance Mirror 2020; sample: 5.200 people representative of the Italian adult population; collection of data: May 2020). 

Such protection needs cut across all client categories. Private, HNW and UHNW clients are rather careful when it comes to protection: 85% of them have life insurance and 92% have insured their property against theft, fire and explosion. 

The word protection has become a mantra in the field of investments. Indeed, the rise of unit-linked policies, segregated funds and composite insurance policies is driving the development of asset management. 

In addition, affluent clients have access to yet another tool, the private insurance contract – highly appreciated by those acquainted with it, it allows the transfer of financial assets in their entirety to an insurance company by means of an internal dedicated fund. 

Private insurance has great, yet untapped, potential. However, this tool is still little known to financial professionals (private bankers, financial advisors and insurance agents), even if its popularity seems to be growing: today, 52% of financial professionals are familiar with private insurance (as compared to 45% in March 2018) and two professionals out of ten (as compared to one out of ten in 2018) have recommended it to their clients (source: FINER® CF, PB, Insurance Explorer). 

While its rise in popularity is an encouraging sign, there is still much to be done. Indeed, only 5 among the 34 banks and private networks contacted by FINER (accounting for less than 15% of the sample) have made private insurance available to financial professionals and, consequently, to their clients. 

In fact, combining private banking services with the legal and financial advantages linked to life insurance, private insurance can be one answer for a wide range of issues related to the management of the assets of affluent clients.

Yet, two main hurdles prevent our country from maturing economically: 1) a backward financial culture which ties Italians to the use of cash, along with the risks associated with it; 2) a virtually non-existent inclination toward protection or insurance. 

Nowadays, protection has become the centre of attention, generating a demand which needs to be capitalized. It is quite apparent that the market of insurance companies is bound by two features: a) it is driven by supply; b) it suffers from reputation issues that stem from the so-called “moment of truth”, the point when the policyholder realizes that, for want of awareness or attention at the moment of the subscription, the settlement of the claims can become a nightmare, even when premiums have been paid regularly. 

Clearly, an informed offer is based on the assumption that giving clients what they demand is fairly simple, however providing them with what they need is an entirely different matter.

Today, insurance companies, agents and sub-agents play a key role in the development of the field by raising awareness on the importance of protection. 

If they prove capable of riding the wave, their role will only grow stronger; vice versa, banks and financial networks will fill their shoes.

Nicola Ronchetti 

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