The most artful saboteur at a dinner party is often the food. Career schemers and covetous business partners are not a patch on a bleeding bowl of beet soup that unexpectedly spills. Heaven help your creamChanel ensemble.
But now help, it appears, is close at hand as general insurance companies have started selling cover for personal possessions such as clothes, shoes, bags, etc. These policies are targeted chiefly at High Net-worth Individuals (HNIs), whose wardrobe budgets could go up to the price of a small apartment. The personal items are protected against calamities like fire, earthquake, flood and terrorism, and, in some cases, burglary, theft, accidental damage and accidental loss. "For instance, if there is a spill or tear in your expensive designer clothing, its repair expenses will be covered," says Ramesh Ramani, senior vice-president, Consumer Lines at Tata AIG. "If a luxurious designer handbag is stolen or lost in transit, the insurance cover will make good its loss."
Given that it's still early days in India, policies targeted at protecting an HNI's personal belongings can be customised to a client's requirement. According to an industry source, the annual premium for clothing insurance would be one per cent of its total value. So, if a client's wardrobe is valued at Rs 10 lakh, the premium would be Rs 10,000 a year. Given the top status of the clients they are servicing, insurance companies do not insist on receipts orproof of purchase, choosing to take the client's word while assigning value to the items insured or determining the amount to be paid out as claim. They do, however ,run their own discreet background checks if the claim seems suspicious or when the item has been purchased in India, where prices are easier to ascertain.
An insurance relationship manager explains how it works. A client whose wardrobe was insured under a comprehensive cover for household effects wanted to replace his travel bags, which he said cost Rs 2 lakh, because one of them was stained. In situations like this, the insurance company measures what is called the 'salvage value' of the item, which is the price at which the damaged goods can be resold. "The client pegged the salvage value at Rs 50,000 and without questioning , we compensated him with Rs 1.5 lakh," says the manager. If it's an accident, the insurer pays the repair costs.
While many companies are promoting a category called 'home insurance' , which literally covers the contents of one's home including electronic gadgets, art, furniture and fittings, not many of them cover clothing. Tata-AIG General offers a cut-tofit 'Private Client Group' (PCG) insurance for ultra HNIs, also offered by its counterpart , the American International Group, in the US and UK. "The PCG covers personal assets of the client and his/her family members," says Ramani. The policy covers art, jewelry and collectibles like stamps, coins, wine, watches as well as expensive household gadgets and decor items, like chandeliers, and personal items like designer clothes, bags, shoes, etc. Bajaj Allianz also covers luxury goods under its comprehensive householders' insurance policy which guards against fire, burglary, theft, and electrical and mechanical breakdowns. R Suresh Nair, head — specialty lines, Bajaj Allianz General Insurance, says that the proliferation of luxury goods has opened up the insurance market in this segment. "With various financing options available, luxury goods have become more affordable. So the awareness and need for insurance is also on the rise in India," he says.
According to a recent report by Yes Bank, India's luxury market is expected to touch $14.73 billion by 2015, from an estimated $8.21 billion this year. Research by Euromonitor International expects this sector to grow at 22 per cent in value terms between 2012 and 2017. Sanjay Kapoor , managing director, Genesis Luxury which retails brands like Canaliand Bottega Veneta in India, says the luxury consumer in India is maturing as exposure to brands increases. "The need to own expensive limited edition pieces is what insurance companies are cashing in on," says Manav Gangwani, director of Infinite Luxury Brands.
While Saloni Nangia, president of retail consulting firm Technopak Advisors, believes that insurance companies offering cover for luxury products is a healthy sign for both industries, insurance experts caution that the demand will be limited. Abheek Singhi, partner and director at Boston Consulting Group, says, "People in India who earn Rs 1 crore annually is a very small number, and that is indicative of the number of consumers who would be open to these offers." Companies marketing luxury insurance confess that it is tough going, as luxury shoppers consider it a waste of money to pay high annual premiums for household possessions guarded by their help and hired security. The fact that luxury goods are often bought using undeclared wealth is another reason for buyers to forgo insurance. Praveen Vashista, MD and CEO of Howden Insurance Brokers, feels companies in India don't have the experience to sell luxury insurance. "Poor marketing has held them back," he says.
Insurers have already begun to finetune their game. Tata-AIG , for instance, is considering partnering with luxury retail brands to offer insurance as a valueaddition to their clients. Kalyani Chawla, vice-president , marketing and communications , Christian Dior Couture India, thinks that is a great idea, as it gives luxury products a stamp of respect. "Luxury products are precious commodities just like art and jewelry, and need to be covered for damage and loss," says Chawla. Many of her clients have inherited collections of clothes, shoes and bags from their mothers and grandmothers, and these vintage pieces are of priceless value today. "People spend fortunes on these items so all buyers, not just collectors, should consider insurance," she says.