By Phil Zinkewicz
--Michael Cherkasky
President, Kroll Associates
It is said that when the legendary Frank Sinatra was laid to rest, there were placed in his coffin a bottle of scotch, a carton of cigarettes and a roll of dimes. Now, given the great crooner's public persona, the scotch and the cigarettes might be expected. But why the roll of dimes?
Well, the story goes that when Frank Sinatra, Jr., was kidnapped, the kidnappers demanded that the famous singer call them to negotiate from a public phone booth. But Sinatra, Sr., alone in the streets, suddenly discovered that he didn't have a dime in his pocket to make the call. Eventually, the situation was resolved and Sinatra, Jr., was rescued. But from that time on, Sinatra always carried a roll of dimes in his pocket wherever he went.
The story itself may be apocryphal, but it does deliver a message. We tend to think of the rich and famous as beyond the reaches of misfortune. In reality, however, the rich and famous may be more vulnerable to exposure than the less affluent--even more than they realize.
"High net worth individuals require specialized services that can mitigate risks that threaten them and their families and assets, as well as respond to crises," says Ross Buchmueller, president of AIG Private Client Group, a new division of American International Group (AIG), launched in July 2000.
Buchmueller says that AIG's new division offers a "customer-driven focus as well as access to insurance coverages and value-added services that enhance protection and can minimize threats to the personal wealth and safety of high net worth clients."
In addition to that, the division has established an agreement with the New York-based Kroll Associates, recognized as a world leader in business investigations, security and intelligence. Kroll Associates is a subsidiary of The Kroll-O'Gara Co.
"Today, business and leisure activities take high net worth individuals and their families to the four corners of the globe," says Michael Cherkasky, president of Kroll Associates. "With these opportunities comes a variety of risks that can, and should be mitigated. Our expanding partnership with AIG Private Client Group enables its high wealth clients to benefit from the high level of physical, educational and informational risk mitigation they deserve."
The AIG Private Client Group's insurance product offerings for high net worth individuals include:
Automobile coverage--This program provides comprehensive coverage that allows clients to choose their own auto repair facility and to obtain replacement parts from the original manufacturer.
Homeowners insurance--This is an all-risk coverage, including guaranteed replacement costs for home and contents. Clients have the option to settle claims in cash, without any obligation to replace lost items or repair damaged property. This program is designed for homes with replacement costs of $1 million or more.
Private collections--This is a worldwide coverage for art, jewelry and other fine collectibles, which automatically extends to newly acquired items.
Excess liability--This is a broad coverage with limits of liability of up to $100 million to help protect wealthy families from catastrophic loss.
The AIG Private Client Group also offers access to specialized insurance products such as kidnap and ransom, aviation and watercraft coverage. The program also provides insurance protection for houses, cars and other personal exposures worldwide.
"In addition to a comprehensive portfolio of insurance products, the AIG Private Client Group will offer risk management services, such as world class home valuation, security, engineering and loss control services," says Buchmueller. "The group can also provide access to other services including art collection management, pre-employment background checks on domestic staff and travel advice for trips abroad."
It is in the area of risk management that Kroll Associates comes into the picture. Ted Price, managing director of Kroll's crisis management division, says that, since the AIG Private Client Group offers access to workers compensation and employment practices liability insurance for wealthy families who employ domestic staff, Kroll offers essential background information on a potential employee's criminal, financial and driving history. "We will also monitor employees' ongoing performance through surveillance and other techniques," says Price. "In addition, we offer insureds driver training, firearm safety and self-defense courses. Moreover, the AIG Private Client Group provides access to insurance that reimburses expenses necessary to restore an insured's identity after fraudulent activity. Kroll will evaluate an insured's computer usage and offer programs designed to mitigate the risk of electronic identity fraud and other electronic intrusions that can compromise the assets and personal security of an insured."
For wealthy families that travel internationally, the kidnap and ransom exposure is always a threat, says Price, who was formerly a deputy director of the Central Intelligence Agency. "We provide AIG's insureds with pre-incident training, analysis and advice to reduce the chances that an insured will be targeted in a kidnapping or extortion scheme," he says. "Additionally, Kroll offers global travel advisory services and information on issues ranging from terrorist activities to common street crime. In the event that a kidnapping or extortion incident does occur, we can supply clients with strategic advice needed to resolve an incident in progress and provide on-site assistance as needed."
Frank Godfrey of Frank Crystal & Co., a New York-based insurance agency, says that other insurers have programs that are targeting the affluent and that they are doing good work, but he insists that AIG's Private Client Group offers more disciplines such as kidnap and ransom, and aviation and watercraft insurance. He says that his firm specializes in the larger accounts where premiums begin at $10,000 a year. "The services that are provided by Kroll are particularly important to wealthy insureds. The company specializes in the area of security and employs people who have strong backgrounds in law enforcement."
Buchmueller says that his division actually put this program together by talking to brokers who handle affluent insureds to find out what their clients needed. "We put the client ahead of the product," he says. "We found out that these clients need much greater liability insurance than is available in the traditional market, sometimes as high as $100 million. In sensitive negotiations, we allow the client's own attorney to participate so as to give the client a sense of security. We target the high net worth individuals and their families as well as the ultra high net worth individuals and their families. There has been significant growth in the number of millionaires and multi-millionaires, so the market is a significant one."
Agents and brokers are the sole distribution source for AIG's new division, says Buchmueller. "Right now, we are working with 130 agents and hope to double that number in the next year. We're looking for highly professional agents who are comfortable in providing advice to clients. We want to align ourselves with agents who provide counsel, not just sell insurance. If an agency has a dedicated profit center to counsel high value accounts, all the better."
"One area we want to emphasize is claims service," continues Buchmueller. "All of the clients who have responded to our claims satisfaction surveys have rated our service as satisfactory or better. In fact, 89% have reported that our service is exceptional. Our Private Client specialists are available 24 hours a day, seven days a week to help clients in the event of a loss." *