“It is important that advisers can approach the whole market”
Hazardous pursuits encompass a broad range of high-intensity activities that often involve elements of speed, height, and exposure to challenging environments. Many of these pursuits are common among HNW and UHNW individuals. Some prominent examples include mountaineering, diving, private aviation, and heli-skiing, all of which carry their own unique set of risks and can present underwriting challenges that may have a profound impact on premiums. Subsequently, financial advisors need to comprehend the nuances when helping clients place life cover.
One of the primary challenges in assisting clients involved in hazardous pursuits is evaluating the level of risk involved. Unlike traditional hobbies, hazardous pursuits come with a heightened probability of accidents, injuries or death. There is more risk on an individual’s life if they take part in these pastimes meaning advisors need to work closely with underwriters to evaluate the specific risks tied to each activity. Engaging in these activities can provide insight into a person’s personality. It is commonly believed that those who participate in these activities are inclined to continue their involvement and explore new ones. These personality traits indicate an increased likelihood of the individual taking risks with their safety, thereby contributing to elevated risk levels for insurance providers.
Advisors need to ascertain specific details of an individual’s chosen activities. Differentiating between activities such as trekking and mountaineering serves as a notable illustration of this need. One crucial factor distinguishing them is the necessity for ropes or harnesses. Additionally, factors such as the altitude of the climb, the presence of a guide, and the specific mountain ranges involved all factor into the insurer’s risk assessment. Trekking is generally regarded as a low-risk activity and typically does not result in premium increases, while mountaineering carries a considerably higher risk profile.
Another common pursuit for HNW and UHNW individuals is diving. Insurers assess various factors when making underwriting decisions for diving, including the depth of dives, the exploration of underwater caves or wrecks, the client’s qualifications, the presence of a guide, and the type of gas and air utilised. The responses to these questions can significantly influence insurance premiums.
The underwriting challenges surrounding private aviation can be equally complex. Unlike commercial aviation, private aircraft vary significantly in terms of type, usage, and pilot experience, making it difficult to develop standardised underwriting criteria. One of the primary challenges is assessing the pilot’s proficiency and experience. Underwriters must carefully evaluate the pilot’s training, flight hours, and safety record to determine the risk involved. Underwriters must accurately assess these factors to load premiums appropriately. Furthermore, private aviation often involves international travel, exposing underwriters to geopolitical risks. The complexity of international airspace and varying infrastructure across countries adds another layer of challenge for underwriters and advisors looking to place cover.
Heli-skiing presents a distinct set of challenges when placing life cover, most significantly due to the remote locations where heli-skiing often takes place. These areas can be challenging to reach, which can hinder prompt medical attention in case of accidents, thereby increasing the risk profile. Mountain weather and snow conditions are highly variable, changing rapidly. This variability can make it challenging for underwriters to predict and assess risks accurately. They must account for the unpredictability of factors such as avalanches, weather patterns, and snowpack stability. Unlike traditional ski resorts, heli-skiing operations are subject to fewer regulations and safety standards. This lack of regulatory oversight creates additional uncertainties for underwriters. While heli-skiing is typically pursued by experienced skiers and snowboarders, the extreme nature of the terrain increases the potential for severe accidents, contrary to the perception that experienced participants are less prone to accidents.
These highly specific details are paramount for advisors to establish before placing a policy on risk. Not only to achieve the best possible rates for the client but to also ensure full disclosures are made to the insurer preventing any issues if a claim were to arise. The more often an individual engages in these activities, the higher their risk profile. The nature of a specific activity can vary significantly based on an individual’s personal preferences. With this in mind, it is important that advisors can approach the whole market. Commonly, each insurer will take a vastly different approach to the risk they are presented with. Some may not offer terms at all while others may offer standard rates or a loaded premium. Therefore, obtaining the best possible rates for a client who partakes in hazardous pursuits can often only be achieved by exploring the whole market.
Author: Jacob Fay, Protection specialist at John Lamb Hill Oldridge
Article published in COVER Magazine in October 2023.