For insurers of collector cars, staying on top of generationaltrends and increasing awareness among prospects about the uniquevalue of their specialty coverage remain the top challenges in thisgrowing niche, according to experts in the field.

With the number of collector car owners on the rise due tonetworking over the Web and retiring baby boomers with disposableincome, the pool of potential insureds has increased in recentyears. Additionally, as new generations of consumers enter themarket, their tastes are expanding the types of cars that areconsidered “collector-worthy.”

Previously, parameters established by the collector communityused to dictate that cars needed to be a certain make, or a certainage to qualify as a collector car, according to Laura Bergan, vicepresident of marketing at American Collectors Insurance, a CherryHill, N.J.-based managing general agency that provides collectorvehicle insurance. “I would say that those days have passed,” shesaid.

In fact, Ms. Bergan said that a car does not even have to be oldto be considered a classic. American Collectors, she said, willconsider insuring cars as recent as a brand new Ferrari, if it isclear that the car is not used as a daily driver vehicle and thatit will appreciate in value over time rather than depreciate–a keyfactor in distinguishing a collector car.

When it comes to insuring collector cars, or even determiningwhat qualifies as a collector car, it is more about the peopleinvolved in the hobby and what is in demand among thatcommunity.

“We look at the person's attitude toward the collector vehicle,”Ms. Bergan said. “One person's Porsche is another person's VW Bug.And we're not here to judge the vehicle.”

Mark Plousis, vice president for diversified products atPhiladelphia Insurance Companies in Bala Cynwyd, Pa., agreed,saying that determining what is a collector car, in addition todetermining the value of modifications made, has a lot to do withsupply and demand, or “what's hot in the marketplace.”

He also said that generational issues come into play, and henoted that what applied to previous generations may not apply toyounger people entering the market. “We still continue to see newsegments every year,” Mr. Plousis said.

One such trend, he said, is the prevalence today of muscle carsin the collector marketplace. He said insurers are starting to see25- to 30-year-old vehicles such as Camaros, Trans Ams andChevelles as opposed to just cars like a 1955 Chevy.

“A lot of baby boomers for the next 15 years will be retiring,and every one of them kind of wants to re-live their youth,” hesaid. “Everybody wants to go out and get that car that they wishthey had in high school, and now they can afford to do it. Theyhave the time and money, and we still see that as a continueddriver [in the collector car marketplace].”

Ms. Bergan pointed to another trend called “restomods” that sheis seeing among collectors, with people taking vehicles from thelate 1940s to the late 1950s and updating them so that they can bedriven with a greater degree of comfort and safety.

As an example, Ms. Bergan pointed to the chairman of AmericanCollectors, Thomas Kanyuk.

“The chairman of our agency, who founded it in the '70s, wasgiven a '57 Ford Fairlane, which was a numbers-matching, very rare,very original car, for his birthday this year,” she noted. “And hetook one spin around the block with his grandkids in the back seatwithout power steering, without disc brakes, without seatbelts, anddecided, 'There's no way in heck I'm going to keep this car the wayit is.'”

Once again, the people in the marketplace and what is in demanddetermine whether modifications like this will increase or decreasethe value of a collector car.

Donna Wares, vice president of agent marketing and channeldevelopment at Hagerty Insurance in Traverse City, Mich., said thatjudgment on the modifications is “in the eye of the beholder.”

Some see value in a car that is in original condition–what Mr.Plousis called a “Survivor car”–while others prefer modernconveniences.

Ms. Wares noted that some collectors who participate in toursmay choose convenience over original condition. “There are toursthat are 3,000 miles long,” she noted, and “collectors want to beable to have some comfort on those tours.”

The trend toward adding modern conveniences to collector carsalso correlates with an overall greater desire among collectors toactually drive their cars, according to Ms. Wares.

“It used to be they would 'park and polish' [the cars],” shesaid, while now–especially among younger collectors–hobbyists wantto drive the cars more on certain days, and they want conveniencessuch as air conditioning, tighter suspension and powerfulstereos.

Staying on top of these trends is important not only for thehobbyists, but for insurers as well, according to Ms. Bergan, whocited it as the most important aspect of insuring collector carsbecause it helps carriers make the necessary adaptations to thechanging market.

“We're extremely eager to spot trends like the restomodmovement,” Ms. Bergan said. “We're really on top of that to see howwe can tap into that market.”

And it is not necessarily easy to determine what may be a futuretrend. Ms. Bergan noted that it has been difficult to figure outwhat cars from the 1980s and 1990s might be considered collectorcars in the future, for example.

All of the professionals interviewed by National Underwriterstressed the importance of immersing themselves in the hobby inorder to understand changing trends and the needs ofcollectors.

“Because we are hobbyists ourselves, we attend all of the bigshows, we attend all of the auctions, and we talk to our clientsand ask them what they need,” said Ms. Wares. “We're always lookingat what it is our collectors need, and we try to expand our productofferings.”

As an example, she noted that Hagerty has a new insuranceproduct available for “automobilia”–coverage for items that autocollectors collect, such as a vintage gas pump, or a poster from anevent, or other auto-related items.

She said that Hagerty will insure spare parts, whether theybelong to the hobbyist's car or if the parts themselves arecollector items. Hagerty will also insure the tools that thecollector uses for the car, Ms. Wares noted.

American Collectors has added new coverages to its policy toadapt to the needs of hobbyists. “One of the most popular bells andwhistles that we've seen is our towing and labor for collectorsplan, which we call our TLC plan,” said Ms. Bergan.

The plan has three different tiers, she noted, including basiccoverage such as towing and locksmith reimbursement. The highestlevel of plan, she explained, has features such as car show expensereimbursement.

Ms. Bergan said this level of the plan will cover theregistration fee for a big car show if a customer who was planningon attending the show sees their car break down or gets into anaccident on the way there. The plan will also cover the first nightof a planned hotel stay if that fee is nonrefundable.

More so than extra coverages, however, collectors are lookingfor the essentials when purchasing a policy.

All of the professionals said the most important aspect ofcoverage, and the biggest factor that distinguishes collector carcoverage from a standard auto policy, is the type of physicaldamage. Collector cars are generally insured under “agreed value”rather than actual cash value or stated value, as standard autosare insured.

“The agreed value is the only way to guarantee that the fullinsured value of the vehicle is going to be paid in the event of atotal loss,” according to Ms. Bergan.

Insuring under agreed value is critical, Ms. Wares said, becausecollector cars typically appreciate or hold their value, whereasdaily driver automobiles depreciate. She said the agreed value is“probably the most critical component for a collector” with respectto insurance.

When it comes to deciding on the agreed value, the customerusually knows best, noted Ms. Bergan, who said insureds generallyhave a better knowledge of the value of their cars than anyappraiser.

Mr. Plousis pointed to how careful the hobbyists are aboutdocumenting any changes or modifications that would affect thevalue of the car. “They're proud of what they've done,” hesaid.

Ms. Wares agreed that clients generally understand the value oftheir vehicles, but she said Hagerty also has the largest databaseof collector car information in the world in case they needassistance.

“Because we're so immersed in the business, we know where tolook to help a client value his or her vehicle,” she said.

Perhaps just as important as the coverage on the vehicle is whathappens when that coverage has to be put to use.

Mr. Plousis called claims service “one of the most importantthings in this hobby,” and said his company works hard to build areputation as an effective claims handler.

He said his claims department is staffed with “car people” whocan appreciate the level of service collectors desire whensomething happens to one of their prize vehicles. “A lot of thesecars are practically pieces of these people's family,” he said.

Ms. Bergan agreed, stating that in the event of a claim,American Collectors does not dictate where customers should takecollector vehicles to be repaired. She said collectors usually haveservice providers and restoration shops in their area they arecomfortable with, and American Collectors appraisers work withthose shops to settle losses and to get the cars fixed.

If claims service and spotting trends are considered 1 and 1A,in no particular order, as far as top factors for insurers, thenmarket penetration would surely be 1B.

Ms. Wares, who ranked insuring a greater percentage of collectorcars with the proper coverage as Hagerty's main focus, saidcollectors immersed in the hobby understand what type of policythey need.

However, she noted there are many owners on the fringe who donot read collector car publications or attend shows, whereinsurance for the hobby is generally advertised. Many of thesepeople, she said, simply insure their vehicles with a basic autopolicy.

“I think the majority of business is on a regular-use policy, sothat's really what we're targeting–those people who don'tunderstand that need to have a collector policy,” Ms. Waressaid.

The lack of awareness about the collector car insurance marketmay not only be with collectors, but with some agents as well,according to Ms. Bergan.

“The disconnect, we believe, sometimes is not with theindependent insurance agent, but perhaps the captive insuranceagent who maybe does not have the connection to this type ofprogram,” she said, “so when someone comes to them with a collectorvehicle, the agent will say, 'Okay, we'll throw it on your standardauto policy and you'll get a multivehicle discount.'”

However, she warned, these collectors may be unpleasantlysurprised if they have a claim and only get actual cash valuerather than agreed value.

Ms. Bergan and Ms. Wares both cited advertising campaigns inauto magazines not directly related to collector cars, as well aseducating their agency partners as important initiatives toincrease awareness about collector car insurance.

While owning collector cars is a satisfying hobby for a growingnumber of people, offering coverage for such vehicles is alsosatisfying to insurers, who are generally collector car enthusiaststhemselves. Sometimes they see very unique collectibles come theirway.

Mr. Plousis said he sees many common collector vehicles, such as1955 Chevys and Corvettes, but in addition, “we insure the vehiclefrom the Chitty Chitty Bang Bang movie. And I always kid around andsay, 'No, it doesn't really fly.'”