Safe and Sound

In the past, sensational tragedies like kidnapping, stalking, and home invasions seemed to happen to someone else. Following the events of September 11 and some other recent high-profile abductions and shootings, not to mention one AMBER Alert after another, the reality is that our world, and our perception of the safety of our world, has changed. No one ever thinks “it could happen to me,” but it does.

The Justice Department estimates that in 2002 there were more than 1.3 million cases of forcible and unlawful entry of residences. That same year, there were 58,000 children who were victims of stranger and non-family abductions. In 1999 (the latest year for which there are statistics), nearly 50,000 cases of carjacking were reported in the United States. In 1998, an estimated one million women and 400,000 men were victimized by stalkers. Still think it can’t happen to you or your clients?

“One in 20 women can expect to be the target of a stalker at some point in their lives, and only half of all stalking victims report the problem to the police,” says Pat O’Connor, executive VP at City Securities Corp, an investment and insurance firm based in Indianapolis. According to a study conducted by a research firm called Corporate Risk International, women take 120 million business trips annually and account for 40% of all travelers, O’Connor notes. “Females traveling alone are more often targets for such crimes as pickpocketing, purse snatching, and assault,” he suggests. Due to such threats, security issues are the chief concern among female executives and travelers, particularly those traveling to a foreign country. “A wealthy individual in a high-profile position becomes a target for stalking” or other types of threats, O’Connor says. “Therefore, their wealth becomes a kind of liability.”

Stalking threats, carjacking, abduction, kidnap and ransom, workplace violence, extortion, and home invasion–and their financial consequences–are just a few of the issues your high-net-worth clients need to be aware of.

“You don’t hear about these things happening very often, but thinking about all of the financial confusion and criminal activity that exists, it is surprising that these kinds of issues aren’t more apparent,” adds O’Connor. “I am quite amazed that there hasn’t been more violence by people who have been defrauded and lost their entire savings from cases like Enron, Qualcomm, and so forth.”

High-net-worth clients have one thing on their minds: preservation of self and their assets. As investment advisors, it is your responsibility to educate your clients or refer them to someone who can explore the risk management options available to deal with these possibilities.

“You always want adequate excess liability coverage, so it is imperative that clients look at their risk management annually, or at least their property and casualty insurance, and all other ancillary coverage,” offers Ed Mooney, a senior VP and investment advisor with Bank of New York in New York. “It is obviously not a fun thing to discuss, but if your clients are in the press a lot, or their information is publicly available in business documents such as annual reports, then I think you have to look at the risk and the cost benefit of purchasing such insurance.”

So what is available? There are a few companies–like AIG and Chubb & Son–selling policies that pay victims of home invasions, stalking, carjackings, abductions, and kidnap and ransom.

“People are definitely more concerned about their personal safety,” says Peter Spicer, assistant VP for Chubb & Son and new product manager of Chubb Personal Insurance. In recognition of that concern, Chubb rolled out in 2001 a family protection insurance plan called Masterpiece. Now available in most states, this personal liability plan is added to an existing Chubb policy. “Having this product is a very personal decision,” he says. “It is peace-of-mind coverage. Should one of these things befall you or a loved one, you would know that extra measures were in place to at least remove some of the financial burden so you can focus on emotional health.”

The family protection plan is broken into four categories: abduction/kidnap and ransom, carjacking, stalking threat, and home invasion. The cost varies from state to state but ranges somewhere between $70 and $135 per year for the average policy, Spicer continues. “Chubb tends to offer products that have a broader appeal to the affluent,” he says. “But this was designed to be available to anyone who wants it, not necessarily the rich.”

Unlike kidnapping and ransom policies that companies purchase on behalf of their employees, the Chubb policies are personal kidnap and ransom policies that individuals can buy for themselves and their families.

Abduction, Kidnap, and Ransom

“Initially it is important to make a distinction between abduction, and kidnap and ransom,” Spicer explains. “You will hear those terms used interchangeably, but for insurance purposes, in a kidnapping there has to be a ransom demand to trigger coverage.” A kidnap ransom policy then reimburses the insured for ransom payments and other related expenses up to the applicable limits. “With an abduction policy, there does not have to be that mysterious phone call or that mysterious note demanding money or some other form of payment,” he continues. If a child disappears and cannot be readily located, that triggers abduction coverage.

In either case, the Family Protection product reimburses the insured for medical and psychiatric expenses, as well as travel, meals, lodging, and telephone expenses incurred while searching for the missing person. Additionally, the insured has up to $100,000 available to use toward a public relations analyst, a forensic specialist, or a security consultant. “So if your child is abducted and you want to hire a private security company to work with law enforcement to try to locate your child, we are going to reimburse those expenses up to $100,000,” Spicer says. The public relations analyst is included for two reasons, says Spicer: to get the word out that the child or other family member has been taken or is missing, and to give parents and family members an opportunity to deal with the emotional trauma without having to face the press. “It puts someone else out on the front lawn to answer questions,” Spicer says.

For the medical and psychiatric expense portion, the policy offers up to $50,000 for the victim on top of any other medical coverage that might exist. “Most people have access to some form of private medical or health care plan, and this money fills in the gaps,” says Spicer, noting it can cover any deductibles or copayments, or out-of-network medical expenses.