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Even the ultra rich need life insurance
Covid-19 spurs UHNWI to see value of wealth planning tool
29 Sep 2020 | Tom King

Many ultra high net worth individuals (UHNWI) in Asia believe they have sufficient financial resources to cover expenses related to life-changing events. Some don’t even have life insurance coverage, preferring to rely on their family business or assets to provide for their families.

Covid-19, however, may be changing that attitude. According to Hong Kong-based Mike Goodall, chief commercial officer at Transamerica Life (Bermuda), the pandemic reminds us that “bad things do happen” and even UHNWI need to be prepared. 

“While I cannot comment on specific cases, what we have seen is that the needs of UHNWI have not changed during the pandemic; in fact, their demand for financial solutions is greater than ever,” Goodall says.

In recent years, there has been an increase in the number of UHNWI looking at succession planning to ensure their long-term economic health as well as to smoothly transfer their wealth to the next generation.

“The result is that many UHNWI 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 – basically that their plans are still ‘fit for purpose’ - in the face of today’s uncertainty,” Goodall notes.

Belinda Au, chief executive officer of insurer Sun Life in Singapore, says her global network of distributors and clients has seen an uptick in life insurance applications recently. “For some individuals, the pandemic has accelerated their considerations to put in place appropriate solution. We believe that it also due to this pandemic that some have experienced first-hand how fragile life can be and thus started to engage in discussions around financial planning,” she adds.

Goodall believes that UHNWI are spending more time with their families amid the lockdowns and quarantines, and this is a major reason for their interest in having more protection.

“While many UHNWI already have life insurance in place, many of them are now revisiting them to make sure they are still relevant. For UHNWI that do not yet have life insurance coverage, there is now greater interest to have one as part of their overall wealth management portfolio,” he notes.

Au says insurance has always been a big part of wealth planning and adequate coverage will help in mitigating and diversifying risks. “Let us not forget that many ultra high and high net worth individuals tend to be invested in a broad variety of assets as well as in their businesses. If you take reference to the current pandemic, we have seen many businesses suffer as a result, not to mention the volatility of equity investments. We definitely see insurance remaining as a core pillar of UHNWI wealth planning,” she notes.

Goodall sees insurance as a valuable financial tool that provides a known amount of money at the exact time it is needed and at exactly the right amount. It can also be an effective savings and investment vehicle, with guarantees and stable returns that are not directly market-correlated. 

“Even for healthy UHNWI who have low risk of an untimely passing, life insurance can offer great peace of mind, providing the (assurance) that a defined death benefit will be there if it’s needed. Moreover, as an asset, cash value life insurance can provide needed liquidity for other planned or unplanned events during their lifetime,” he says.

Life insurance policies also distribute death benefits to beneficiaries without the need for a highly public and time-consuming probate process. “Many UHNWI lead very international lives with businesses, assets and family members located around the world. When confronting multi-jurisdictional planning, and dealing with jurisdictions that impose estate or inheritance taxes, using life insurance products as succession planning tools are proving popular,” Goodall adds.

Insurance at the UHNWI level involves a lot more than just filling forms. “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 UHNWI,” he explains. 

UHNWI from around the region tend to “fly to buy” life insurance in sophisticated financial jurisdictions such as Singapore or Hong Kong. But the current situation challenges this conventional business model, opening the door for innovation. 

“We have adjusted by utilizing technology to provide alternatives to enable business to be done without requiring our UHNW customers to travel. We’ve developed new business processes which allow our brokers to have non-face-to-face conversations with their UHNW clients (covering both onshore and offshore clients), including new paperwork and the adoption of e-signatures, among others,” he says.

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