Many people will be aware of the high net worth and ultra high net worth markets, but the sector that eclipses both — in size at least — is the mid net worth market, sometimes referred to as mass affluent. Many in this bracket are considered as the high net worth clients of tomorrow. As such, the demands of the mid net worth will be very different to that of the mass market and more closely aligned to the needs of high net worth clients.
For many, the source of this wealth and journey into mass affluence has been the growth in property prices. Those who were able to get onto the property ladder in the past decade or so may have benefited from rising house prices and built up sizeable chunks of housing equity in their primary residence. Borrowing against, betting on and unlocking this equity has enabled many among the homeowning population to live more affluent lives and afford more luxuries like cars, holidays and so on.
Similarly, as we continue to disprove the notion that we’re approaching ‘Peak Stuff’ and the consumer-led economy continues to grow. It’s completely normal for most of us now to carry phones, tablets and other electronic devices worth hundreds, even thousands of pounds around with us. The value of our possessions continues to grow – but many mid net worth’s’ are woefully underinsured for all of the ‘stuff’ we’re buying, wearing and keeping on our homes.
For contents insurance purposes, anyone with between £80,000-£200,000 of insurable contents can be thought of as mid net worth. A 2017 study defined the mass affluent as those with £100,000 in investible assets, while a separate report indicated that anyone with a vinyl collection, Belfast sink, wine fridge, AGA cooker, home-office or playroom can be said to be living in a mid net worth household.
It is thought that close to 3.5 million households currently fit into this category. There’s a huge opportunity to offer the right insurance cover to these clients – for home and contents but also life, IP, CIC and other protection products. These customers often have high disposable incomes but low savings and a high level of indebtedness – they need cover in case the worst should happen. And there’s new and emerging risks to think about – cyber risk is becoming much more of a thing, for example, based on all of the smart devices we have in our homes. Mid net worth’s may take more holidays – so there’s a burglary risk there too. The LV= research indicated that just 12 per cent of mass affluent households had taken out contents insurance appropriate to their wealth and assets.
It is important that brokers are attuned to the needs of these customers and are aware of the different options that are available to meet them. Armed with this knowledge, brokers will be in a strong position to provide the best possible outcomes for this sector of the market.
Toni Smith is chief operations officer at Primis