The insurance industry is eager to get a seat at the table of the generational wealth transfer that will see rich families pass $70 trillion to younger generations over the next two decades.
That’s a hard seat to get. Selling insurance to very wealthy people is difficult. They can afford the cost of health care or other coverage. “These clients don’t need protection,” said Karim Gilani, president for Greater China, Singapore and international high-net-worth at Sun Life. “They want estate planning and wealth preservation.”
Insurers that cater to the very wealthy always try to fit into the family’s conversation about how insurance products can help hand wealth down to younger generations – usually in the context of a private-banking relationship, where the insurer can bundle life insurance with investing.
Canada-based Sun Life, which is also an asset manager with $1.5 trillion of client assets, has pioneered this niche. For insurers, serving the ultra-rich has been the preserve of North American carriers, partly because of tax accounting differences (as institutions under European IFRS accounting rules face higher costs to booking long-duration products than those operating under US Generally Agreed Accounting Principles).
More rich and more old
But the huge sums now available from rich families is prompting more insurers to enter the market. Asia is especially appealing because it is a growth market. It is both logging the highest level of ultra-high-net-worth family formation, and its aging demographics will trigger lots of inheritances.
HSBC Life made a splash in February 2024 when it set a Guinness World Record for the most valuable life insurance policy ever sold: a $250 million whole-of-life protection policy to one person, with the proceeds going to the insured’s beneficiary after their death. (The previous record was a $201 million contract written in California in 2014.)
But it’s more than a life insurance contract. The policy also included features meant to protect the person’s wealth for his descendants. HSBC said in 2023 it had issued 10 other life insurance policies valued at $50 million or higher to individual customers, highlighting Hong Kong’s role as a nexus of wealth management and insurance.
Meet thy customer
More than any other line of insurance, serving the rich depends heavily on personal relationships. Understanding the customer for risk management is one thing, but the biggest challenge is for insurers to get to know them in the first place.
“Access is the million-dollar question,” said Sun Life’s Gilani.
The luxury industry thrives by attracting wealthy people, staging high-society events that put rich people in one another’s company, creating fun experiences, and stoking some jealousy and pride.
That doesn’t really work for insurance companies. Their vibe is legacy planning, implying death – no wait, legacy! Which is not a cocktail-party theme.
Traditionally, insurers reach the ultra-rich through private banks, sometimes in relationships negotiated by brokers. Private banks also seek to serve rich customers with legacy planning, estate management, and generational exchanges, along with services in philanthropy, art, and so on. Often the top private bankers become involved in family decisions – and disputes.
Know thy customer
This is true in Asia too, but harder for private banks, which in turn makes it trickier for insurers, who are usually not the ones initiating these relationships. Insurance may account for up to 10 percent of a family’s total invested assets, so it’s sizeable but not a primary concern.
The private-banking model is based on European habits, where families are keener on wealth preservation and often rely on a single trusted bank. In Asia, families have five or six banking relationships, don’t show anyone the consolidated balance sheet, treat private bankers more transactionally, and retain a taste for growing assets – which makes it harder for asset managers or insurers to pitch boring bond funds.
It gets even more complicated when younger generations get involved: their interests are in alternative investments such as private equity and venture funds, or in crypto.
“We’re working on accessing the ultra-wealthy beyond private banks,” said Justin Man, CEO of Aperion International, an insurance broker that specializes in serving rich families. It was he who cited the $70 trillion figure, speaking at a conference organized by Insurtech Insights.
That means ingratiating themselves with family offices, or going via independent financial advisors or external asset managers. Private banks remain the primary go-to, however.
Know thy customer even better
Even if an insurer wins a seat at the table, it can be difficult to pitch their contribution. They might be selling to an elderly tycoon who is the policyholder, but who isn’t going to be the beneficiary. The tycoon might not necessarily involve the children when talking investments with a private bank, so insurance reps try to get the younger generations directly involved – usually to make the sale happen, since it’s the kids that will get the money.
Asia is also presents underwriters with a data challenge.
“How do we translate demographics into solutions?” asked Jean Wong, CEO for global high-net-worth business at Manulife. She notes that in North America, Manulife can underwrite policies for people up to 90 years. That’s not possible in Asia, at least not yet.
For insurers, managing the risk around such exposures can be difficult. A carrier won’t assume the entire risk of such large policies. They will rely on reinsurers. And the reinsurers are careful.
Munich Re is one such player that specializes in ultra-wealthy cover; it claims to have the highest capacity (balance sheet) for the segment worldwide. Akash Gupta, managing director in Singapore, says rich people have the means and the desire to live long lives. “We want to be long on their lives,” he said, so Munich Re is interested in reinsuring mortality cover.
But there are risks, Gupta said: the people who “live fast and die young”, and those with murky sources of wealth. The industry needs good information to manage these risks, which means being confident it is backing people who will live long, healthy lives. “Strange things happen when people are worth more dead than alive,” Gupta added.
Enter fintech
As one expects for such a high-touch business, technology has not played a big role in this segment. That is changing.
Sun Life, for example, is partnering with Pints.ai, a Singapore-based fintech that builds small-language models (SLMs) that can allow financial institutions to train generative AI on proprietary data. The startup won its first deal with Aditya Birla Capital in India, and there the client found use cases in using genAI to support its relationship managers, specifically those targeting Indian high-net-worths for asset management and insurance. Sun Life, which has a local insurance JV with Aditya Birla, began to use it in Hong Kong.
“We help RMs save time by gathering a holistic view of the client,” said Partha Rao, co-founder and CEO. Normally putting together such a picture takes days but querying through an SLM takes only a few hours, he said.
Another fintech example is Aperion’s seed investment in CoverGo, a Hong Kong-originated insurtech with a platform to help insurers build and launch products digitally. Aperion’s Man says this is more cost effective than building its own tech or paying a vendor.
The broker is finding value in using CoverGo to create life products designed for ultra-wealthy customers. “This can enhance the value proposition to the client,” Man said. “It provides us with the digital immediacy that clients expect.”
That sense of digital savviness is critical for brokers on the front line. It becomes less important for carriers, and even less for reinsurers, who have little or no direct contact with policyholders.
Digital, but not too digital
Gilani at Sun Life says machine learning is useful at improving risk management, provided there’s enough data. Underwriters can only accept a risk if they can measure it, and manage it. Over time, more data will expand the capacity for insurers to underwrite wealthy people, but Gilani says it won’t replace what underwriters and actuaries do.
Carriers want to use tech to be more efficient, but they are wary of being seen as relying on digitalization to reach clients. “These customers don’t want to be treated like retail,” said Manulife’s Wong.
Moreover, these products are bespoke so it’s difficult to automate the processing. Wong says straight-through processing is suited to lower-value policies where volume is the name of the game. But not when the sum-assured is in the millions.
“We won’t have STP on a $10 million sum assured,” she said. “What cost will I save if I automate this? If you make one mistake and get mortality wrong, that $10 million death benefit shows up on your income statement and your earnings take a hit.” She says although tech can streamline the process, it can’t do so at the expense of the high-touch model – both from sales and risk perspectives.
Gupta at Munich Re agrees: “The economics don’t makes sense to invest heavily in technology for the high-net-worth segment.” Gradually, he expects solutions built for the mass affluent will creep into serving the ultra rich.
Catering to the tastes of the young
And while industry executives noted that younger generational wealth has a penchant for crypto, they are wary of introducing crypto into their products.
“A client can already invest directly in crypto,” said Geoffrey Au, chief product and in-force officer for Hong Kong at HSBC Life. “They don’t need an insurance wrapper.”
These executives are also grappling with whether to extend capacity to cover a client’s crypto exposure. Today, they are not willing to do so.
“If you have assets that are volatile, the sum at risk goes up and down a lot,” Gupta said. “When the sum at risk is at its highest, it also correlates to the highest level of debt. The reinsurer must keep this in mind if someone wants to provide cover around bitcoin assets.”
And no one suggested they’d accept payment for their underwriting services in bitcoin. There’s trying to get ahead of the next trend and then there’s running a business that makes sense.
