Insurers are expanding into the family office space in Hong Kong and Singapore to target the needs of wealthy families in line with consumer demand, says global management consultancy McKinsey & Co.
Insurers, together with banks, multi-family offices (MFOs), and WealthTechs, can serve the many family offices by using a framework focused on solutions, service, scalability, and security. Serving family offices has long been the domain of banks and MFOs according to an article published by McKinsey.
Insurers are setting up teams to directly engage with family offices to provide highly customised solutions with a focus on estate planning.
Challenge: Limited understanding of insurance products
Despite the vast potential for bespoke insurance products that can help with wealth transfers and estate planning as well as multi-jurisdictional needs, Asia-Pacific’s family offices currently have limited engagement with insurers. Family offices may not realise the potential solutions insurers can offer. One reason for this is that single-family offices, often led by former bankers, are typically more comfortable formulating investment strategies than working with insurers on a comprehensive plan that includes wealth transfer and succession planning.
Mr Karim Gilani, president of Greater China, Singapore, and international high net worth, at Sun Life, says that “there is a need for the industry to engage and educate families on the potential of insurance to enable families in their wealth transfer and preservation process, such as insurance policies covering multiple generations of beneficiaries across the globe, or policies providing liquidity during estate transfers”.
Ms Wong Sze Keed, CEO of AIA Singapore, says that “providers need to go in with a more holistic approach, with a full suite of products to holistically serve families. For instance, insurers cannot just go in and pitch insurance solutions; they also need to collaborate with other professionals, such as tax advisers and legal advisers.”
Potential solution
Insurers can consider educating family offices about the benefits of insurance solutions beyond life coverage, which extends to succession planning. In addition, there is a clear need to collaborate. Insurers can build an ecosystem for value-added services including tax advisory, immigration support while serving families in multiple jurisdictions, legal support, and so forth. Core questions for insurers and other service providers include what can be built and offered in-house versus being outsourced and which provider will take the fiduciary responsibility for the customer relationship. Rather than the current fragmented delivery of services from multiple providers, family offices interviewed by McKinsey say they would like a one-stop shop that caters to their needs.
Insurers
Insurers are increasingly developing strategies to serve family offices, recognising the demand for tailored insurance solutions. They gain traction with bespoke policies underwritten on a case-by-case basis. For instance, an Asia–Pacific insurer recently underwrote a master policy for a family office with several individual beneficiaries, a highly bespoke process involving substantial premiums and large sums assured.
Mr Harpreet Bindra, CEO of HSBC Life Singapore, said, "More work needs to be done to structure products that address specific needs, particularly from the perspective of sum assured across the family. Multijurisdiction and multigeneration nuances offer challenges and opportunities with sophisticated holding structures involved.” The fee structure for insurers typically involves high premiums for these highly customised policies.
Insurers, meanwhile, can boost engagement with family offices by collaborating with other service providers to educate them about tailored insurance solutions. By investing resources and improving their distribution strategies—such as training existing teams, creating new channels with direct service teams for family offices, and partnering with banks (beyond brokers)—insurers can serve family offices more effectively.
A framework for serving Asia–Pacific’s family offices
Insurers can also enhance family office solutions by leveraging their networks and partnerships, offering services beyond insurance such as tax and legal advisory as well as governance structuring.
Insurers should also consider enhancing post-policy-issuance services, such as regular check-ins with families, white-glove services with a focus on educating the next generation, and perks such as fast-track access to top hospitals as part of a combined health and insurance infrastructure. Lastly, insurers could ensure their infrastructure is ready to serve family offices by improving risk models using data and analytics to minimise losses from large sums assured—an avenue for exclusive collaboration with reinsurers.
Insurers, meanwhile, can expand into value-added services by focusing on wealth planning and succession advisory, while WealthTechs can use technology solutions to address pain points across the customer journey, complementing their investment expertise.
State-run Life Insurance Corporation of India (LIC), the country’s biggest life insurer, has committed INR6bn ($72m) for its digital transformation journey, according to the company’s chief risk officer Mr Sunder KrishnanO.
The insurance company also