Each month, LuxeSF profiles a member of The Luxury Marketing Council. This month we talk with Randy Schneider, personal insurance manager in the Northern, CA region for the Chubb Group of Insurance Companies. That artwork on your living room wall, that second home in Tahoe, that yacht docked in Sausalito ... chances are they’re insured by Chubb, the nation’s leading insurer to the luxury marketplace.

LUXESF: Let’s start with the background information. A lot of people know the Chubb name but they’re not sure about the focus and dimension of the company.

SCHNEIDER: We’re one of the largest specialty insurers in the world, with north of $48 billion of assets. Chubb is the largest insurer solely dedicated to the affluent personal lines market. The division I work for, Chubb Personal Insurance, underwrites $3.7 billion of affluent personal insurance premium worldwide. Our next closest competitor does approximately $800 million.

LUXESF: Let’s talk about just that luxury customer. What are you insuring? What are the primary categories?

SCHNEIDER: We insure homes, automobiles, and valuable articles, such as jewelry, furs, fine arts, silver, and collectibles -- really any item of value. Items in this category tend to be movable or transportable. We also provide liability coverage, both excess and primary. You are hosting a dinner party and a guest trips and falls down your staircase. The cause: one of your children left a toy on the third stair. Liability coverage protects you against harm that you’ve caused to other people. There’s also a product called Employment Practices Liability. Many of our customers have a butler, a nanny, a housekeeper or a maid. What they quite often don’t realize is that this opens the door for them to be sued for wrongful termination, employment discrimination, and sexual harassment, out of their act as an employer. Very few insurance companies even offer a solution like this. The last category would be the personal security and travel arena. If you’re traveling overseas and you happen to fall ill -- say you’re going on safari -- and you require emergency medical transportation back to a proper medial facility that could be thousands of miles away in some cases, we provide a specialized coverage for that as well.

LUXESF: As sort of an aside, the most unusual item you’ve ever covered?

SCHNEIDER: That would probably have to be a personal snow-cat of one of our insureds ... a vehicle that they use to drive around their compound in the wintertime in Colorado .

LUXESF: Within the luxury category, where does the bulk of the insurance get written?

SCHNEIDER: The home. Generally, people’s homes are one of their most prized possessions. Our customers generally invest a lot of time and money in into their homes, and that’s generally what they’re most interested in protecting.

LUXESF: We’re talking contents here -- not the home itself?

SCHNEIDER: No, we’re primarily talking the home itself, and then the contents secondarily. Our customers’ homes generally incorporate a lot of higher-end finishes, more than the standard home. Many of our customers’ homes have imported marbles and expensive woods. Some customers even incorporate materials from century old barns into their homes. One of the reasons that people come to Chubb is that we offer what’s called “replication” coverage. Most insurance companies replace their customers’ homes and/or possessions with something of like kind or quality. Basically, that means if you have marble countertops in your home, and they’re made of Italian marble, a standard insurance company might go to one of the nationally known home improvement chains in the event of a loss and replace them with marble countertops that are of similar look. We guarantee to replicate what our customers had prior to their loss. So we’re not going to a chain store for the Italian marble countertops. We’re going to Italy . If they had wide pumpkin pine floors that can’t be purchased anymore, and that floor was damaged, we will mill them a new floor to replicate exactly what they had before the loss. Most of the losses that our customers suffer are partial losses, not total losses. Replication is especially important in partial loss scenarios, as our customers want the damaged and undamaged portions of their home to absolutely match after all restoration work has been completed.

LUXESF: So, literally, it’s one-for-one replacement.

SCHNEIDER: I can give you a quick little story that best demonstrates replication. We had a customer who had a magnificent home that was built in the early 1800s. The home unfortunately burned to the ground. In the claim settlement process, where we were working with the customer to find out exactly what features of their home had to be replicated, our customer told us that one of the features that they found most charming, and that they wanted to have incorporated into their brand new home, was the creaking noise that the staircase made when they walked on it. So, we hired an engineer to put a creak into the brand new staircase.

LUXESF: Luxury customers ... how do they differ from the average buyer? What are the peculiarities or the idiosyncrasies in how they buy insurance?

SCHNEIDER: A high percentage of our prospects don’t know that they’re currently being underserved by their current insurance carrier, so they don’t know that they’re a potential Chubb customer. 80% of the affluent market, (being defined as having investable assets of $ 1 million or more), in the state of California specifically, and 62% nationwide, are currently insured by what we call the mass market insurance companies. While the mass market insurance companies are perfectly well suited for the mass market, they don’t specifically address the unique needs of the affluent customer. A point of difference about Chubb is that we don’t sell insurance directly to our customers. We sell through independent insurance agents and brokers such as Hub International, which is also a member of the Council. What we help Hub do is point out the “pain” that their customer may experience in the event that they have a loss with their current carrier, and how Chubb can mitigate that pain.

LUXESF: What do you mean by pain?

SCHNEIDER: Let’s say that your customer is driving down the road, and hits a child that darted out in front of their car. How much could they be sued for? How much excess liability coverage do they have? Chances are that if they’re insured with a mass market insurer, they’ll probably have one or maybe $2 million of coverage. Is this enough to properly protect their assets? At Chubb, we offer up to $50 million of excess liability coverage, and in some cases, $100 million. The pain in this case is the realization on the part of the customer that should they be sued, they may have to sell physical assets and their investments to settle the lawsuit.

On the home front, one thing that we do differently is that we appraise every home that we insure. A pair of Chubb eyes views every single Chubb home that we insure, and we properly evaluate the replacement cost so that we can put enough insurance on that home. At the end of the day, if there is a claim, we know that the house is properly covered. Mass market insurance companies generally don’t appraise the homes that they insure. They rely upon computer models to estimate the replacement cost of a home, without an understanding of the unique, and expensive, features that many of our customers’ homes have. The pain in this case is the uneasy feeling that although the customer has been paying insurance premiums for years, their coverage may not be enough to prevent hefty out of pocket expenses in the event of a claim.

LUXESF: Any other peculiarities of the luxury consumer’s buying process?

SCHNEIDER: As a whole they tend to rely upon their trusted advisors.

LUXESF: And who are they?

SCHNEIDER: Generally, it can be anyone from a financial planner to a money manager to a wealth manager, people they trust to manage their assets.

LUXESF: Real estate agent?

SCHNEIDER: To a certain degree. But real estate tends to be more of a quick one-time transaction where there isn’t the same opportunity to build up long-term trust between the agent and client.

LUXESF: What is the primary marketing thrust for Chubb right now? What do you rely upon most to get to the luxury buyer?

SCHNEIDER: Primarily, we rely upon our independent insurance brokers to sell our product. Hub International would be an example of an independent insurance broker. In addition to that, we are endeavoring to build our brand name and network through that trusted advisor community that I just mentioned.

LUXESF: How are you doing that?

SCHNEIDER: We’re doing that through the relationships we have with organizations such as the Financial Planning Association, where we participate in both their national conference and in local chapters throughout the U.S. We also attend local events to meet financial planners and wealth managers. We attend several industry conferences throughout the year. For example, last year we were part of The Family Firm Institute which held an international conference here in San Francisco for family firms.

LUXESF: With respect to the agents, what do you do to support them?

SCHNEIDER: We provide a best in class product, traditional collateral materials, and an unmatched ease of doing business, but at the end of the day, this is a relationship business. The more useful we are to our agents, the more business we will write. Whether it’s being in our agents’ offices talking to them about what we have available, what’s new, what’s old, helping them solve their problems, a client with a difficult exposure position, for example, we are always looking for ways to build even stronger relationships with our brokers. That’s the way we tend to get most of our business.

LUXESF: Chubb versus the competition? To the extent that you have competition in this luxury sector, how are you trying to distinguish yourself?

SCHNEIDER: There are two different levels of competition that we face. If 80% of the affluent market is insured by mass market insurance companies, then that’s our largest competition. Against that group, it’s easy to distinguish ourselves because our products are so dissimilar. We address the unique needs of the affluent customer, they do not. When we compete against companies who try to go head-to-head against Chubb, we really differentiate ourselves based on service. We’ve been doing this for over 25 years. We have been focusing on the affluent market longer than any other company. It’s been easy for some of our competitors to grow quickly by buying the business based on price, but it’s been difficult for them to service their customers to the level that we have. In building a $3.7 billion book of affluent personal insurance business, we simultaneously built the infrastructure to be able to support our claims, our billing, and our policy issuance. And those are service issues that you might think are unimportant compared to price, but I cannot tell you the number of customers who left us because competitors entered the market with lower prices, but who have come back to us because of the poor level of service they received. A very high level of service is very important to these customers, more important than you might ever imagine it to be.

LUXESF: How do you primarily develop your leads?

SCHNEIDER: We rely, almost solely, the leads that our independent agents are uncovering. Those agents align themselves with centers of influence -- financial planners, money managers and wealth managers. These advisors are meeting day-in and day-out with affluent customers whose insurance needs are not being properly addressed. That’s where our largest and our best customers come from. We also have a fairly large number of customers that approach us, either through our website or call us directly.

LUXESF: Why have you maintained the agent intermediary in a day and age where that middle person is being taken out of the transaction?

SCHNEIDER: They’re the experts in doing what they do. These are people who understand and know how to attract customers and how to service their business. It also provides us with a network of “fingers” that blankets the country -- in some cases all over the world -- right down to the local level. That would take us decades to replicate. It’s is a distribution channel for our product.

LUXESF: Do you do any collaboration programs?

SCHNEIDER: Yes. In the past, we’ve been involved with events such as the Concourse d’Elegance in Monterey, and the Tennis Hall of Fame in Newport, Rhode Island. We’re involved with the Music@Menlo Festival here in Northern California, and with charity antique shows, the Winter Antiques Show in New York and the Ellis Antiques Show in Boston. We try to align ourselves with events that strike a chord, or have a shared passion, with our target market customers.

LUXESF: You joined the Council through Hub International. Ultimately, you had to say yes or no. Why did you decide to join?

SCHNEIDER: There were some very, very solid luxury brands that were members of the Luxury Marketing Council, and I was very interested in specifically learning about their customers’ buying habits. We wanted to learn, especially from the speakers and presenters, what motivates the luxury customer to make a buying decision. I find the learning very transferable. I find those discussions to be very enlightening and they really give us a lot of guidance in the positioning of our product.

One concluding thought. We are undoubtedly an insurer of the affluent market. Our target market, however, isn’t only the mega-affluent. For the most part, we’re interested in insuring homes when the replacement cost approaches one million dollars. So you could have a million dollar home, two Mercedes, and some jewelry and not have $25 million of assets in the bank but still be a great candidate to be a Chubb customer. Affluence covers a wide spectrum wealth. And so does Chubb.