Ken Research announced recent publication on, “Targeting UK Mass Affluents with Insurance.” The report explores the differing attitudes and insurance needs of higher affluence customers in comparison to the mass market. It explores the demographics of the group, the products they hold, and their purchasing preferences. It also highlights the leading providers for mass affluent, and discusses the opportunities and best ways providers can reach and engage with this customer group. It can be put to use my marketers to understand the differing needs of very affluent customers in comparison to the mass market and to improve customer engagement by recognizing what is most important to mass affluent customers and how insurers can adapt their products and services to meet their needs. It is a suitable solution to discover the top providers within the very affluent insurance market and thus, to explore the opportunities the mass affluent market provides in terms of insurance innovation.
The ‘mass affluent’ represent an important target market for the retail banks, with several offering ‘premium’ products and services designed specifically for this moderately wealthy demographic. The level of financial wealth held by UK households has increased by dramatic proportions in the last twenty years. Offering a premium or lower-entry private bank account not only helps to reach these more profitable individuals, but also acts as a useful gateway product, through which other products and services can be channelled. The mass affluent population in the UK is growing, meaning the demographic is an opportunity for providers selling personal insurance. Mass affluent are more likely to be male, have higher household incomes, and be married compared to retail customers. The assets of mass affluents are higher value, making their insurance needs more complex. They have different lifestyles compared to retail customers, meaning they also have different insurance needs. They travel abroad more often, and are more likely to own a second home, a car that requires specialist insurance, and high-value items that require additional cover.
The main reason for this marginal slow down in the rate of financial wealth accumulation is that we are not expecting another bull-run on the London stock market. However disposable income growth and savings rates are expected to remain as high as they have been in recent years. The factors determining wealth distribution – world trade, labour market deregulation, self-employment, executive stocks and options, the technology entrepreneurs, taxation and attitudes to savings – will in combination act to make the skew in wealth distribution more acute. Their impact will increase the share of wealth for the top twenty percent, but their effect will be less intense than it has been over the last five years. Private wealth is measured in the UK with perhaps more precision than virtually anywhere else in the world. This is mainly because of the British affinity for home-ownership and private pensions, two industries that are closely regulated; London’s importance as a world financial centre, another source of regulation; and the efforts of the Inland Revenue Service in securing capital gains and inheritance taxes. However, UK citizens are not required to declare their wealth levels in the way that they have to reveal, on an annual basis, their personal incomes. For wealth itself is not directly taxed; it is the income from wealth – interest, dividends and profits from assets – that are subject to income and capital gains taxes..
The sources of financial wealth – why the numbers of ‘mass affluent’ have grown The distribution of wealth (in its broadest form) in the UK is mostly the result of wealth accumulation of previous generations. Tax structures and changes in the nature of employment may have affected the distribution at the margin, but much of the store of personal wealth has been inherited by its current owners. Pillars on which this population incremented were:
The growth of the world economy is a vital engine of economic growth for the UK. The problems caused by the appreciation of sterling’s value against the euro zone currencies since 1996 have emphasised the UK’s dependence on the world economy for trade and job creation. The last decade had seen continual openings of foreign markets, from eastern Europe to China, as more of the world has adopted capitalist new consumers and lower cost production facilities, have encouraged capital mobility on an unprecedented scale.
Labour market de-regulation
Another source that has acted to heighten the skew in the distribution of wealth is the gradual de-regulation of employment in the UK during the 1980s. While employment law has certainly become more complicated over the last decade, especially for small companies, there has been increased freedom for companies to adjust their workforce size and location and to retain and reward highly skilled workers. This trend has mirrored the decline in influence and membership of trade unions and other occupational associations.
Self-employment has been important to financial wealth creation because it not only brings about greater financial control for individuals who have to provide accounts of their business but also encourages more detailed financial planning because of the inherent risks involved in self-employment
The spread of executive stocks and options
The use of stocks and options to remunerate and retain staff has increased rapidly during the last five years. The aim is obviously to tie key staff members into the medium term business plan, to motivate them and perhaps to defer their full remuneration until profitability of the business venture has been confirmed. Government organised share-save schemes, giving tax allowances for employee share-buying over time, has undoubtedly encouraged this form of remuneration.
The penetration of personal insurance products is higher among mass affluents than retail customers, and they pay higher premiums. In the UK, mass affluent individuals tend to be more mature, although they are not exclusively. This wealthier segment of the population comprises a diverse range of people: from young entrepreneurs and high-income earners, seeking to build their wealth, to income-poor but asset-rich retirees, who are seeking to maintain a good standard of living in retirement and/or tax-efficient ways of passing on wealth.