Rich South Africans are splashing cash differently
High-net-worth individuals are spending their cash in different ways as they have not been spared from the weak economy.
“We are seeing that the sluggish economy is leading to frugality, meaning that while high net worth individuals have the means, they are choosing to acquire fewer, but higher quality possessions,” said Tarina Vlok, MD of Elite Risk Acceptances, a specialist high-net-worth insurer.
She said that there has been notable growth in the second-hand luxury market with a focus on sustainable and responsible shopping.
However, she stressed that the affluent also need to ensure that they are efficiently insured.
“There is also likely to be continued investment in alternative asset classes like classic cars and high-end jewellery, especially watches. But given that we are still experiencing the tail-end of COVID-19 supply disruptions, where these items are not readily available for replacement, there are risks to acquiring unique, expensive items,” said Vlok. Insurers may also not honour a claim if the item was originally stolen.
Moving away
Vlok also acknowledged the rise in semigration, which offers opportunities for previously underserviced areas, such as the Whale Coast, Western Cape Winelands, Garden Route, and West Coast.
Vlok said that this allows rich individuals the opportunity to acquire assets in smaller, safer environments.
“However, acquisition of properties in eco estates in remote areas can create challenges for clients when it comes to reinstatement. There may be few service providers in the area, and the industry may need to get creative when it comes to claim reinstatement,” said Vlok.
She also warned that HNWIs with goods in foreign countries should look at insurers in those areas, as insurers based in SA man not honour these claims.
“If clients send their children overseas, it is important to ensure that their children’s possessions are insured in that country. Local insurers are not able to compensate for losses in these situations. There is a difference between items taken with you when you go overseas for business or travel, and items kept there for an extended period for temporary residence or study,” she added.
Alternative energy
She also noted that there has been an increase in alternative power systems due to the struggles of South Africa’s energy supply.
“Clients can effectively negate the cost of electricity by going off the grid, also ensuring continued power supply. They will also very likely add significant value to their property,” she said
This trend is expected to continue in 2024 as load shedding continues to hurt South Africans.
“We cannot stress enough the importance of expert installation of backup and alternative power generation systems,” she warned.
Fraud
HNWIs are also at risk of growing fraudulent activity as online transactions continue to increase, whilst the shift to online remote and hybrid work models has also increased the vulnerability of businesses to cyber threats.
“It is prudent to be alert and aware when interacting or transacting online. We see too often that clients are looking at their non-life insurers to compensate them for financial losses incurred through cybercrime. There are specialist cyber products available, but not all insurers have the appetite for these, she said.
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