JofA branded podcast: The evolving insurance market for high-net-worth clients

In this Journal of Accountancy branded podcast, hosted by Clint Costa, CPA, J.D., LL.M., a senior wealth strategist at Choreo, experts discuss how to help clients, especially high-net-worth ones, navigate growing and changing challenges in seeking proper insurance coverage.

Play the episode below or read the edited transcript:

Transcript

Introduction: Thank you for tuning in to this Journal of Accountancy branded podcast. This episode is from our sponsor, wealth management firm Choreo. In the episode, Choreo’s Clint Costa, a senior wealth strategist, and David Winslow, a managing director, are joined by an expert guest in their discussion about several aspects related to insurance. They discuss how advisers such as CPAs can help their clients navigate challenges and changes in the insurance market for high-net-worth individuals.

Clint Costa: Welcome to today’s podcast on the evolving insurance market for high-net-worth clients and business owners. We’ll be discussing the current challenges in the insurance market, common gaps in insurance coverage, and how CPAs can collaborate with insurance experts to provide better outcomes for their clients.

My name is Clint Costa, and I’m the senior wealth strategist at Choreo. Choreo is a wealth management firm operating at the intersection of tax and wealth with offices and clients across the United States. At Choreo, we focus on how we can achieve holistic planning outcomes for clients by teaming up with CPAs and other professional advisers. I’m joined today by my Choreo teammate, David Winslow, and our trusted contact, Michelle Hirsch of Brunswick Companies. David and Michelle, welcome. Please introduce yourselves.

David Winslow: Thanks for having me, Clint. My name is David Winslow, and I’m a managing director with Choreo. I sit in Charlotte, North Carolina, and work with high-net-worth families, as well as a lot of business owners and entrepreneurs, and look forward to chatting with you, Clint.

Michelle Hirsch: I’m Michelle Hirsch from Brunswick Companies. I am third generation of Brunswick. My grandfather started the business in 1972, and we are a property and casualty broker, although you’ll understand soon why I hate the term broker. We like to consider ourselves more of a risk management concierge. We handle all types of property and casualty insurance. But today, we’re going to focus on the private client sector, where we help high-net-worth individuals, families, professional athletes, and public figures figure out what this crazy world is all about when it comes to property and casualty insurance.

Costa: Thank you, David and Michelle. Our goal today is to help CPAs and accountants to understand the challenges in the current market, the gaps we see in client insurance coverage, and how CPAs and accountants can ultimately team up with wealth advisers and insurance specialists like Michelle to bring valuable insurance solutions to clients.

Michelle, we see, I think, across the board a very challenging insurance market, one that continues to harden, one where large insurers continue to exit, rife with obviously natural disasters that are creating lots of headlines and headaches for private clients, high net worth, and business owners. What are you seeing in this realm of insurance?

Hirsch: It’s a challenge. 2024 was the fourth-largest payout year in the history of recorded stats. There were 27 individual billion-dollar payout events. Think about that. Twenty-seven times, insurance companies were paying out collectively more than a billion dollars. If you look at the map of the country of where these events were taking place, it wasn’t just wildfires and hurricanes on the coast. It truly spans the entire span of the map. The entire country, between wildfires and tornadoes, these convective storms with the hail and lightning and flash flooding — we’re just seeing incredible payouts from these insurance companies, and insurance companies are in a for-profit business. They have to be able to cover their loss ratios.

Thus, the rest of us are paying for it. Their reinsurance is going up. Their costs are going up. Between the increases in the cost of goods and labor across the board, the bills are just going up. We’re seeing that when you go to the grocery store, it’s no different from insurance companies. There is no light at the end of the tunnel. It’s not going to get better. That’s why it’s so important to at least understand who your carriers are and where you fit in the marketplace because it’s a challenge out there.

Costa: Absolutely. David, what are you seeing on the ground with clients around their insurance coverage and the difficulties of obtaining proper coverage?

Winslow: Thanks, Clint. A couple of things. Again, I work with families, so I’m not a property and casualty expert; that’s why I work with consultants like Michelle. What I will tell you is that here on the front lines with a lot of the families that we work with, this has been front and center. In North Carolina, we just had Hurricane Helene come through and do tremendous damage to the whole western part of the state. The eastern part of the state gets routine hurricanes on the coast.

We have a lot of clients in Florida, so it’s really hit home, and it’s for us, over the last couple of years, we’ve really pivoted towards ensuring that we work with families to get with someone like Michelle who can offer high-caliber risk management advice because real estate and the other exposures that they have are a huge amount of their balance sheet. It’s critically important that we’re getting that kind of advice and a great topic that’s timely right now.

Costa: That’s right. Michelle, back to you. As you know, I’m formerly ultra-high-net-worth focus, the state trust asset protection and business planning attorney. It was always very interesting to me in my former legal practice before I joined Choreo that most ultra-high-net-worth clients, very sophisticated, large asset bases, complex assets like art, like very expensive homes and other things like that, business risks from operating businesses, that often those clients were very underinsured. Most often had been with the same insurance agent renewing the same insurance for decades, even as the balance sheet and the complexity grew. Would you agree with that? What do you see in your experience are some of the most underinsured or just completely ignored risks?

Hirsch: I’m going to give you two stats, frankly: 70% is the magic number. Seventy percent just so happens to be for two stats. Seventy percent of individuals are underinsured when they are looking at their homes. The dwelling value on their homeowner’s policy is underinsured, 70% of us. Seventy percent of high-net-worth-eligible individuals or families are not with a high-net-worth carrier. Not only are we underinsured, we’re also with the wrong carriers. What happens is, you get your first house, you buy your first car. You go maybe to one of these commercials or someone who was your parents’ person or your real estate agent recommended, and you set it, you forget it, you hope you never need it.

As you said, Clint, you upgrade over time, three houses later, four jobs later. It’s completely different income and asset outlook later. You’re still with that same carrier with the same coverages that you started off with. Being able to really, honestly look yourself in the eye and say, I have graduated. It is time to look at all of my policies and see if this is still the right fit is so important, because most people, unless you’ve had a claim, will never realize how underinsured they are until they have that claim. Then they’re going to wish that they had sat down with someone.

It has just become so transactional and such a commodity that they see these commercials. They’re really funny. I love all these mascots. On any professional sports game you watch, you’re going to see insurance commercials. But for anyone with substantial assets, none of them should have a carrier with a mascot. The differences between those high-net-worth carriers and those mass-market carriers are vast. It really is staggering. It’s the wrong coverages and the wrong carriers.

Costa: I love the marketing in those commercials.

Hirsch: I laugh every time.

Costa: They are so great.

Hirsch: My kids love them.

Costa: David, you said earlier you’re not an insurance expert, but certainly you deal with holistic planning for ultra-high-net-worth families. How do you think about insurance gaps and coverages, and risk mitigation when you start to advise clients and think about their balance sheet as a whole?

Winslow: Maybe three years ago, we embarked on a journey to do reviews for every single family that we work with. I have yet to come across any family that we work with that has not had significant gaps in their coverage. Some of those gaps are small, and some of them are very vast. But I’ve yet to come up with any family that we did not need to embark on doing an overhaul and making some significant changes to their coverage and how they thought about it.

I think, again, as everyone has already alluded to, it’s just an area that’s been very ignored by not just clients. It’s been ignored by their advisory teams, and I think it’s like a critical factor for advisers, whether you be a CPA, attorney, or wealth adviser like me, someone has to step into that void and get them the right advice. But I think, again, it’s probably one of the most critical items that planners should be focused on.

Hirsch: In fact, Chubb actually did a study with Oliver Wyman and found that only 34% of advisers are bringing property and casualty into their planning process. There’s a huge opportunity.

Costa: That definitely jibes with my experience, David and Michelle. Certainly, at the level of the higher-net-worth client business owner, it really does take a village, not to use a cliché, but it takes a team of advisers. I know how both of you operate with your clients. That’s probably a great segue into the next point or question I wanted to raise for you, and I might start with David, because David, you actually spent a good portion of your career prior to Choreo being in the wealth management side of CPA firms.

We know that CPAs are often cited as the go-to adviser for high-net-worth clients, for business owners. That’s obviously a nod to how special that CPA-client relationship can be. We know that CPAs sit in that spot for clients and large clients who could benefit. What do you think in terms of when you talk to CPAs about broadening what they’re doing, the role they’re serving, and the services that they’re trying to bring to their valued clients? How do you talk to them about something like bringing insurance services, bringing these more holistic services beyond perhaps the traditional CPA services to their clients?

Winslow: I think most CPAs that we work with are loath to want to address topics that they don’t see themselves as being the subject matter expert in, like whether that be tax, audit, consulting, they’re reticent to be engaging in conversations that would expose maybe that they aren’t the experts in those cases. What I really emphasize with them is you don’t need to be the expert in this area.

I led off our call today saying, I am not an expert in property and casualty insurance, my mandate is to ensure that the families that I work with get the very best possible advice that they can. I think CPAs share that same value around giving their clients great advice, making sure that they’re working with an objective, hopefully conflict-free firm that really is advice driven.

I say this is a value-add for your clients. You don’t need to be the expert, but it’s critically important that we engage the family in discussion around protecting their valuable assets and their balance sheet. You put that — the term we use or the analogy we use is building that moat around their balance sheet, and that’s just critically important that the entire advisory team needs to have that mindset.

Costa: I think it’s a great point. Michelle, in your role you collaborate with professionals of all kinds around these types of clients, these high-net-worth clients and business owner clients. How do you coach advisers, whether they’re CPAs or other types of advisers, around bringing you in where you can do the most good? Also, I would love to hear your thoughts on high-net-worth-specific carriers, carriers that really focus on the high-net-worth market and how they differentiate from what advisers who don’t focus on insurance might think of as an insurance solution.

Hirsch: Sure. Well, first, I would say, based off of the current increases in premiums, based off of the retiring rate of brokers, and based off of the acquisition rate, most clients either are angry at their premium, are angry because they don’t know who to call anymore, or they’re angry because no one will call them back. When an adviser says, “When’s the last time you’ve had your property and casualty reviewed?”, or “Would you be open to a second opinion?”, or “Do you have a relationship with your property and casualty resource?”, my bet is most of them are going to say, absolutely, sure, and thank you because here’s why I’m frustrated.

Just asking the question, and it’s free to do. Everyone has it, everyone needs it, and there’s no bad second opinion. Even if it’s purely just, here’s what you have, go talk to your person and make those changes, at least a second set of eyes, and they trust you as the adviser for bringing us in.

As far as the high-net-worth carrier goes, the coverage differences can be night and day when I mean, we could have a whole podcast just on the differences between mass market and high-net-worth carriers. Even though there’s coverage nuances, like, do you want to be able to rebuild your house no matter how much it costs versus just what’s the number listed on the policy that already is half of what it should have been or like a cash-out option.

Let’s say I have no desire to rebuild this house if it were to go up in smoke. I want a check. OK, does your carrier allow that? There’s lots of differences, and I can go into nuances, but at the end of the day, what really is the most important is how these carriers are going to show up during a claim. Those high-net-worth carriers, they don’t want you complaining. They want you standing on top of a mountaintop shouting how amazing this experience has been. I have clients that won’t leave a carrier because of the way they handled their basement flood in 1987.

It really is about these carriers stepping up to look for coverage, not look for exclusions, and to make a claim experience so wonderful that they just want to get you back to where you were prior to the loss and make the experience along the way the least amount of hassle as possible. I could do another podcast just on claim stories, but there is such a difference. Sometimes, yes, there is a price tag to upgrading to a high-net-worth carrier.

But also, many times we’ll go from a mass-market carrier to a high-net-worth carrier and actually save money. Because with higher assets, the middle-market carriers, they just jack up the price because, wow, that’s a big house. That’s going to cost a lot, or wow, those are really nice cars. That could be really expensive if there’s a total loss. But it’s still those same vanilla coverages. These high-net-worth carriers, this is all they do. They actuarily calculate for the right premium. I sometimes feel like those commercials during the halftime show of my NBA playoffs, where I can say to clients, I’m actually quadrupling your coverages and saving you money. It is not always you get what you pay for, but it is the awareness of understanding the differences between these carriers is so important.

Costa: Insurance seems like a commodity until you actually have to make a claim, and you have those long nights where you’re not sure if you’re actually going to get coverage. That’s really important, especially as we climb up the ladder of complexity and wealth. David and Michelle, you both worked on a client recently together. I would love to hear a thumbnail of that. David, perhaps you could introduce the client profile, and Michelle would you be so kind as to fill in the gaps in terms of how the insurance process worked?

Winslow: Sure, Clint. We onboarded a family maybe a year or so ago, who is probably like a case study in the property casualty world of everything you’ve done wrong and the importance of this topic. This is a very successful corporate executive and his spouse, and he had just every complexity you can imagine — multiple homes in the U.S., multiple homes overseas, served on a lot of boards of directors with associated liability, investing in a lot of venture capital. Had a massive art collection and a boat and a rental property. I mean, literally, everything that would keep a property and casualty consultant like Michelle up at night, they had, essentially.

One of the first things we did when we onboarded this family was I got my team together and said, Mission No. 1 is looking at the P&C coverage here because I’m sure we got a lot of gaps, and it’s critically important that we build the right foundation for this family. We assembled all the information, got Michelle everything she needed to do a comprehensive review. Ultimately, ended up getting all the coverages done, got everything done. It’s a real success story, but Michelle can probably speak much more eloquently about the risks that she saw and how she went about building that moat around their balance sheet.

Hirsch: Yeah, it was, truly a textbook case study of why this is so important. They had, I think, 12 different carriers on things that they didn’t even know. Some of it they had sold, some of it wasn’t even covered. When we were in discussion, that’s when the Mexico properties came up, and that wasn’t even part of the initial thought because they thought it was Mexico. Out of the country, out of sight, out of mind. We had it all consolidated with one high-net-worth carrier that came in. On paper, this family is a challenge to underwrite, and that’s where we pride ourselves on being a little different is we actually picked up the phone and talked specifically to each one of our underwriters to explain the situation.

My favorite part of the story, though, was when we sat down with the client, with David and his team, and we went line by line and explained what this stuff actually means and really educated the client so that they could make those informed decisions that, all in, we did increase their coverages significantly. I think at the end of it was like maybe a couple grand more, but they couldn’t pay that premium fast enough because they knew how much more protection they were going to get because we actually took the time to explain each one of these coverages — what they mean, examples of what could happen, and how the policy would or would not respond. They just really understood and have such a greater appreciation for what risks they’re taking on personally and what risks they know now that the insurance company would protect them in that time of loss.

Winslow: From my seat, I’ve found this stuff, and this is what’s important for our advisers, whether they be accountants or attorneys, whoever’s hopefully listening to the podcast would be. This is one of the greatest value-adds. I’m constantly amazed at the differences between what we perceive our value to be versus what clients perceive is valuable. This is very valuable when you point out gaps in coverage and risk that they currently have. I’ve seen the same thing, Clint, when we do financial planning work for kids of some of our successful clients and take care of their kids or grandkids. They’re so appreciative of services like that. I think it’s just a lesson in why advisers need to step outside of their comfort zone and really look at some other areas to provide expertise to their clients.

Hirsch: I’ll just jump in to say real quick that it’s really not even a comfort zone because you don’t have to do anything other than make the introduction. When you have a good partner, they’re going to make it as seamless a process as possible.

Costa: Well, I was going to ask you each for a parting thought, but I think you preemptively and did a much better job.

Hirsch: Drop the mic.

Costa: I think today what we learned is that market volatility is putting clients at risk. I think we learned that most high-net-worth clients and business owners probably have some gaps and maybe are underinsured. We also talked a lot about how CPAs can really take the lead in introducing the review process and bringing in experts where it’s appropriate. David and Michelle, thank you for your insights today.

Hirsch: Thank you.

Winslow: Thanks, Clint.

Conclusion: Thanks to Clint Costa, David Winslow, and Michelle Hirsch for their insights, and thank you for listening to this branded episode of the Journal of Accountancy podcast.