Here at SFLuxe we meet all sorts of interesting people, often from the worlds of fashion, real estate, technology and venture capital. Somehow we never thought an insurance guy could be interesting.
But after a chat with David Costello, Founder and CEO of Cause Insurance,we walked away with a totally different understanding of just how much fun the insurance business can be.
Especially if you’re David Costello.
Damion: One of the things that I find interesting about you is that you’ve proven that the insurance business doesn’t have to be boring.
Dave: I’m probably one of the big exceptions to that because I’m jet-setting all over the world. I’m on people’s yachts, and I’m in people’s villas and, you know, when I go to insure them I end up becoming friends with most of the people I deal with. I’m invited to their next party. I become part of their life. So it’s really a lot of fun.
D: Are there a lot of people in your profession who work at your level with ultra high net worth individuals?
Dave: Almost none. I’m one of AIG’s largest production brokers in the western United States, and so I represent AIG a lot on events. When I go to the events I get business.
D: What kind of events do you host?
Dave: As an example, I was the host representing NorthStar Risk Management for the Robb Report Car of the Year at Meadowood in Napa. They bring in 14 cars, the cutting edge cars like Ferrari 599, Lamborghini’s, that kind of thing, and they bring in two groups of people to test drive the cars in Meadowood. So we drive 200 miles an hour down the Silverado Trail, rate the cars, then go on to the next car.
D: What kind of people go to that?
Dave: Well, it’s very wealthy people who gave between $50,000 and $100,000 to a charity just to get on the lottery to join, so it’s a very exclusive thing.
D: What other events have you hosted?
Dave: There was a very exclusive event in the Hall Rutherford wine cave. It’s an Austrian wine cave that’s closed to the public that I first saw through the founders of Yahoo, who took me there once. So we had 50 people in that room that were super high net worth, and held a major dinner party. Unbelievable room. The Donald Lipski crystal chanderlier alone was a million bucks.
D: That sounds like a great evening! Now, tell me about your trip to Monaco earlier in the year.
Dave: I was there for the SeaKeeper’s event. One week of yacht hopping from megayacht to megayacht. And then Relais & Chateaux had their chefs on the megayachts. So we were partying with these very wealthy people from Dubai and Monaco and Europe and places like that. And I was in Porto Cervo, Sardinia, for the Rolex yacht event. I pop up in all these kind of exclusive events.
D: What’s your favorite place to travel?
Dave: Monaco is wonderful. I’ve been asked to open an office there, and I probably will. Everywhere you go, everyone you run into is worth a gazillion dollars and wants insurance. So it’s kind of exciting.
D: They don’t have insurance already?
Dave: Most of the insurance market is an eclectic thing where you have a policy with Allstate that’s some shitty policy. Then you have a homeowners policy with another direct writer, where they only have that one product, and if they can’t satisfy you with that one product they have nothing else to sell you. But I’m a broker and I can represent 20 companies to you.
D: What does that mean?
Dave: I represent you, the consumer, to the insurance companies. I defend you to the insurance companies and find you the lowest rates, then come back to you and say this is the best deal. But most of what I do is I run my own insurance company through Lloyd’s of London that I founded in 1998 for high-valued homes. It’s called The Sterling Program.
D: How did that come about?
Dave: I put that insurance program together because in 1997, if you offered homeowner’s insurance in the state of California you were required to offer earthquake insurance, and then there were two big disastrous earthquakes, the Loma Prieta here, and the Northridge quake in Southern California. Collectively the carriers lost about $40 billion. So they said if you’re going to force us to offer earthquake insurance then we’re either not going to renew everybody in the state of California or leave the state ourselves, or just fold our tents.
D: So what happened?
Dave: All these realtors couldn’t close escrow on these big homes because they couldn’t get insurance, and you have to have insurance to close the deals in most cases, unless somebody is paying all cash for a house, and they’ll self-insure. There was a panic in the market. I went back to Lloyd’s and came back with a five percent earthquake deductable when nobody wanted to offer earthquake, and doing high-value homes north of a million. So I was the only broker in town and running my own insurance company.
D: How did you get involved with AIG?
Dave: The AIG Private Client Group — AIG is the largest insurance company in the world — stepped in and said they wanted to start doing what I was doing. I was just doing the segment of the homes and then finding the carrier for the auto. And they said we’re going to put a package together anywhere in the world where we’ll do your home in, say, Pacific Heights or Atherton, and your second home in Hawaii, your home in the South of France, a yacht or boat, and fine art collections, even if it’s $100 million, or we’ll do aircraft if you have a Citation 5. Put them all together with one policy, one effective date, and more coverage than anybody could offer at a cheaper price. So AIG said any events that you want to do, we’ll help promote, to get business. I started doing that with the wine cave event and the Robb Report event, and then I did the La Paulee wine event.
D: Tell me about the La Paulee event.
Dave: Owners of wineries in France in Burgandy, France came over to the Westin St. Francis Hotel and poured hundreds of thousands of dollars worth of wine. At our table I think we went through $80,000 worth of wine that evening.
Dave: It was a blast. And all these super high-end wine aficionados came out. It was really quite an event.
D: Something I’ve noticed is that so many ultra-high-net worth individuals are completely unknown by the general public, and yet they have unimaginable wealth. There are so many hidden billionaires around here!
Dave: Oh, they’re everywhere. They don’t dress fancy. And they’re absolutely everywhere. I deal with a lot of billionaires, and they make me sign NDA’s — non disclosure agreements, to say that I won’t talk about who they are, the assets they have, where they live, and all that stuff. I have many people like that that I deal with, and they’re multi-billionaires. I started out doing stuff in the Silicon Valley with Mary Gullixson, and those are all dotcom people, so I insure the founding people from Ebay and Cisco and a lot of big names.
D: You’ve mentioned a couple of times that you can get your clients the lowest price. But what kind of money are we talking about. If I buy an art piece for $100 million, how much would it cost me to insure it?
Dave: For every $100 of value we apply a rate, and it ranges between 20 and 25 cents. We apply that rate per $100 times the value of the painting, and that’s how we get the rate. It’s anywhere in the world coverage. And in our coverage it has a factor that if you pay, say, $100 million, and the replacement costs end up going higher, even though today’s replacement cost is $100 million, they’ll give you a pop of another 25 or 50 percent above the stated amount, which is kind of a cool thing that they have. And it covers all risk, if somebody steals it, earthquake, fire, anything.
D: Do you do a lot of art insurance?
Dave: Big stuff, yeah. Christie’s level stuff. I have $100 million art collections where they have these computer programs that sort it all out and they’re constantly selling and buying art, deleting and adding items, and that type of thing.
D: What’s the leading thing that high net worth individuals like to collect?
Dave: Everybody’s a different story. I mean, the first thing that pops into my mind is art. But there’s this person I just had a phone conference with — they have 350 cars. All Lamborghinis, Ferarris, Masseratis. And this guy who collects them only wants zero on the mileage and will never drive the cars. He keeps them in crates. And so that’s his thing.
Dave: I have a lot of people with $5 and $10 million wine collections. We do wine collections all day long. So that’s another thing. And I have a lady who has a doll collection, $2.5 million in dolls. And then I have another client who just collects gem stones. He has one of every shade of every gem stone in the world. More private gem stones than the Natural History Museum in Los Angeles.
D: I’m intrigued by the guy who collects the cars and doesn’t drive them.
Dave: Doesn’t drive them, and leaves them in the box. That’s his thing. He wants them forever as just the day they came off the assembly line.
D: Does he plan on selling them at some point?
Dave: No. His wife says it drives her nuts because she says I think if you have something, you should drive it.
D: And what does she collect?
Dave: Oh, she’s got every kind of everything. She likes watches, very expensive jewelry, that kind of stuff.
D: Everyone has their own thing.
Dave: I was with a guy in the Peninsula who has the largest collection of antique slot machines in the world. And all the things that came from the Funhouse at the Beach in San Francisco. He has all those things. So I’ve seen every kind of collection of things that you can imagine.
D: How often do people file claims?
Dave: We have a regular stream of things. There’s always something happening to something.
D: So there is a need for all this insurance.
Dave: Yes. Like jewelry. If you have a diamond ring and it falls out of its setting, that’s a common thing. We get a lot of jewelry claims. It’s lost, they don’t know where it is, it fell of the clasp.
D: What’s the rate for jewelry coverage?
Dave: The jewelry rate is $1.50 for every $100. Antique car collections are a different rate. Wine is for every $100 it’s fifty cents because it’s also not volatile, unless there’s an earthquake or something.
D: It seems like there’s been a lot more interest in Napa wines this year than before.
Dave: Well, wine is one of the sectors of business that is absolutely up because of the exchange rate in Europe being so strong. And we have a quality product. People from, for example from Japan and Russia, are gobbling up wine from the United States because basically it’s on sale. It’s half-price. It’s high quality. And people want the Napa Valley labels anyway. So it’s flying off the shelves in Napa.
D: A lot of money from Dubai, would you say?
Dave: Tons of money from Dubai. I’ve actually been invited to Dubai to do some royal family business and stuff. An unending amount of money in Dubai.
D: You said you were opening and office in Monaco. Why not Dubai?
Dave: Because I’m only one guy. My staff doesn’t want to go to Europe even. So Monaco is because it’s central to Europe, and people in Dubai tend to go to Monaco a lot. Everything is about money in Monaco.
D: It sounds like you’re having a lot of fun. Why do you think you’re successful at this?
Dave: Because I’m passionate about what I do. I like successful people. I find that successful people usually have an interesting story to tell. And these people have the mobility to do what they want to do. Money buys you freedom of choices.
D: And the need for a lot of insurance.