The insurance landscape – vibrant and fast growing especially among the High Net Worth Individuals (HNWI), gained significant traction in 2020. With the world coming to a standstill, the HNWIs were forced to slow down in 2020 as well. Consequential conversations with regard to lifestyle, health, longevity and succession took center-stage. Life insurance – an answer to these conversations, was thrust into the spotlight. To fully understand how HNWIs can leverage off the benefits of the current day insurance services, we interviewed Brandon Caneer, Head of Proposition Development & Advanced Marketing at Transamerica Life (Bermuda) Ltd.
As unpredictability and uncertainty continue to shape 2021, what are some of the trends that are currently shaping the HNW segment?
Brandon Caneer: High Net Worth Individuals (HNWIs) often have complex needs and considerations, varying from paying potential estate taxes, protecting the family’s lifestyle, ensuring business continuity, to funding children’s education, amongst others. Coming to terms with the global health crisis coupled with continued economic uncertainty, we noticed that the needs of HNWIs haven’t changed during this challenging time – in fact, their demand for financial solutions are greater than ever.
We have actually seen increased awareness from HNWIs in the areas of health, longevity, and legacy planning. As a result, many HNWIs are now looking to include life insurance as part of their overall wealth management plan, while those who already have life insurance plans are revisiting them to make sure they are still relevant, reviewing if they have sufficient coverage.
While the insurance industry has been around for the longest of time, could you tell us how insurers today are well poised to offer wealth management solutions to the HNW and UHNW segment?
Brandon Caneer: Asia is leading the global population growth for HNW and UHNW individuals. Many of these HNWIs and UHNWIs are approaching retirement and are facing the prospect of passing on their wealth for the first time. According to Transamerica Life (Bermuda) Ltd.’s (TLB’s) latest study on HNW succession planning, Succession Planning 2019: Converting Challenges to Actions, we found that Asia’s HNWIs today are still less prepared for wealth transfer/succession planning than their counterparts in other regions — with 57% admitting they have done nothing regarding estate planning and wealth transfer, compared to 32% in the West.
With over 85% of businesses in the region being family-owned, the transfer of wealth is very much linked to Asian values around duty and family, which brings about a unique set of challenges to succession planning for this segment.
Life insurance can play a critical role in any successful wealth transfer plan as it can provide a solid financial foundation and serves as a versatile tool to protect business assets, family, partners and key employees from an unexpected death. Despite the myriad benefits of life insurance and its ability to help mitigate jurisdictional, compliance, legal and tax issues, the lack of knowledge and misconceptions about life insurance point to a growth opportunity for life insurance providers and brokers.
How is the insurance industry as a whole evolving to cater to HNWIs changing preferences?
Brandon Caneer: While many HNWIs already have life insurance in place, many of them are now revisiting them to make sure they are still relevant. For HNWIs that do not yet have life insurance coverage, there is now greater interest to have one in their overall wealth management portfolio.
Traditionally, the HNW life insurance business has been a high touch, face-to-face model. This is not surprising when one considers the large amounts and level of personal and business details involved, which is why trust and the quality of advice provided are critical to HNWIs. HNWI’s from around the region tend to “fly to buy” HNW life insurance in sophisticated financial jurisdictions, such as SG or HK, to sign applications and forms.
The biggest challenge the insurance industry faced was that people can’t easily travel, therefore the current situation challenges this traditional business model. We’ve developed new business processes which allow our brokers to have non face-to-face conversations with their HNW clients (covering both onshore and offshore clients), including new paperwork, more flexible underwriting, and the adoption of e-signatures amongst others.
As HNW look to diversify and find stable financial solutions, what role can the insurance industry play here?
Brandon Caneer: Today, many HNWIs/UHNWIs have assets that are spread globally, and they often have family members that are living abroad across several different countries. This leaves them facing jurisdictional and compliance issues as well as legal and tax challenges in their efforts to financially plan for their retirement and the future preservation and efficient transfer of their wealth.
Life insurance, therefore, is an ideal tool for providing liquidity in exactly the right amount at exactly the right time – helping HNWIs to protect and efficiently pass their wealth to the next generation. This can be used to cover:
- Immediate obligations: e.g., estate taxes, medical costs, outstanding liabilities or the cost of replacing the HNWI, especially if he/she was a key person in the business.
- Ongoing costs of living: e.g., lifestyle maintenance for family heirs.
- Future obligations: e.g., education funding for children or philanthropic desires.
In addition to protection, HNWIs use life insurance for savings and investment diversification, attracted to its generally stable returns, which are not directly correlated with other asset classes.
How is Transamerica Life Bermuda shaping customer experiences, considering that the financial services landscape is undergoing continuous disruption?
Brandon Caneer: At TLB, our business revolves around people and partnerships and we are always looking for ways to add more value to our customers and partners. The demand today for diversification of financial solutions in order to meet different HNWIs’ needs is increasing. Additionally, there is no “one-size-fits-all” life insurance solution. With the current market volatility and low interest rates, there is also an increased need for wealth management solutions that provide greater growth potential, whilst also preserving capital and providing flexibility.
This is something we recognized and addressed with the recent launch of our new Genesis Indexed Universal Life (Genesis Indexed UL) plan in Bermuda and Singapore. Genesis Indexed UL is designed for HNW customers who are seeking more opportunities to grow and protect their wealth, whilst being shielded from market downturns. It is a testament to our continual commitment to providing innovative solutions that meet real HNW market needs.
We also recognise that digital expansion is critical to meet the growing expectations from both our partners and customers for digital accessibility and services. Hence, TLB is taking key steps to utilise technology, for example, virtual conferencing and e-signatures, as well as adopting streamlined processes and flexible underwriting that allows us to conduct non face-to-face business, while still maintaining the personal relationships we have with our HNW customers.