While the struggling economy has left its mark on virtuallyevery line of property and casualty insurance, the collector carniche remains stable and is even growing, as carriers look toassociate with known players in and out of underwriting to win overenthusiasts, according to professionals in the field.

The collector carcommunity has not been immune to the effects of the financialmeltdown. Indeed, observers note that car values are down from peakhighs in 2007–by as much as 25-to-30 percent, according to McKeelHagerty, chief executive officer of Hagerty Insurance Agency Inc.and the Hagerty Group in Traverse, Mich.

Jerry Hourihan, senior vice president and national sales managerfor AIU Holdings' Private Client Group, said collector car auctionsheld by Barrett-Jackson–which recently partnered with thecarrier–show values down in the 10-to-20 percent range.

Still, Mr. Hourihan and Mr. Hagerty agree their firms have notseen too negative of an impact as a result of the poor economy.

Mr. Hourihan said the same people who needed coverage in pastyears require insurance today–and as the economy improves, valueswill move upward again. AIU, he added, is still binding and issuingpolicies, albeit with the lower values.

People may be buying fewer collector cars, Mr. Hagerty noted,which is contributing to lower values. But for a lot of collectors,these cars are among the most important parts of their lives. Thus,even in a bad economy, Mr. Hagerty said, a collector will likelysell other possessions before giving up their collector car, makingfor a “relatively stable” market.

Collectors also recognize the significance of having insuranceand getting protection for their vehicles, according to MarkPlousis, vice president for diversified products at PhiladelphiaInsurance Companies in Bala Cynwyd, Pa.

Supporting this notion, Mr. Hourihan, in describing the originsof Barrett-Jackson's partnership with AIU's Private Client Group,said the auction house conducted a survey a couple of years agoasking what additional services it could provide to its topclients. Insurance, Mr. Hourihan said, was a top concern amongcollectors.

Additionally, Mr.Plousis said collector car insurance is a relatively inexpensivecoverage. “It's not cost-prohibitive,” he said. “Compared to otherforms of insurance, it's reasonable.”

He also said insurance coverage is not just a desire forcollectors but, in many jurisdictions, a legal requirement aswell.

The stability of this market draws occasional new entrants, Mr.Hagerty noted, but they tend to only write for a couple of yearsbefore circulating out again. He said some big carriers or brokerswill have a strategy to get into a lot of niches, but without athorough understanding of the collector car market, these newentrants do not last.

The typical pattern, according to Mr. Hagerty, is that a newentrant comes into the market with lax underwriting standards andtries to lower prices to buy up market share. What these entrantsdo not understand, he explained, is that repair, restoration andother costs for this niche have been increasing over the last5-to-10 years.

Additionally, Mr. Hagerty said collector cars are complicatedrisks that call for an understanding of the market and expertisebeyond the typical claims department. For example, a windshield ona 1967 Ferrari could cost as much as $20,000, he pointed out.

Reaching the collector car community is another challenge forinsurers. One way to overcome that obstacle is to partner with aname already established within that community. For PhiladelphiaInsurance Companies, that involved purchasing the book of businessof Grundy Worldwide, also in the Philadelphia area, which has beenserving the collector car market since 1947.

Mr. Plousis said partnering with a brand name like Grundyeliminates some of the barriers to enter this nichemarketplace.

Hobbyists are loyal, Mr. Plousis said, and partnering with atrusted brand can help show a company plans to be there for thefuture. “That was our target–a quality book of business that's beenwith the industry for a long time,” he noted.

AIU Private Client Group's partnership with Barrett-Jackson isdifferent in that Barrett-Jackson is not a provider of insuranceand does not have a hand in underwriting risks. However, the valuefrom the partnership, explained Mr. Hourihan, is in the firm'sendorsement of AIU Private Client Group's insurance products.

AIU's Private Client Group, Mr. Hourihan noted, had been in thecollector car market for almost 10 years, but the recentpartnership with Barrett-Jackson opens up new opportunities from amarketing standpoint, while providing an avenue of access tothousands of collectors.

Barrett-Jackson, Mr. Hourihansaid, is a known brand within the collector car community–an“extremely dynamic marketing organization” with an active Web siteand mailing list, now active in promoting AIU products.

Aside from partnering with an existing name, pros in thistight-knit market said it is important for companies and agentsalike to get out to car shows, rallies and other collector-attendedevents to establish their presence and credibility.

Ultimately, regardless of partnerships and market conditions,success for insurers comes down to providing products collectorswant. Mr. Hourihan said AIU offers an “agreed-value” policy thatcan cover up to 150 percent of stated value at the beginning of thepolicy. The policy provides roadside assistance coverage thatincludes flatbed towing. The coverage is also worldwide, as opposedto limited to North America or the United States.

A global presence is important, according to Mr. Hourihan,because collectors are increasingly going to places like Europe toshow their vehicles.

Philadelphia Insurance Companies does not have mile restrictionson its coverage, according to Mr. Plousis. The policy also adjuststhe vehicle value to keep up with inflation, and includes tripinterruption and spare parts coverage. If a car is in an accident,he noted, or is in a transitional stage and there are extra parts,collectors can obtain coverage for them.

Mr. Hagerty said his outfit is constantly tweaking its offeringsand broadening core products. One newer policy he cited offerscoverage for “automobilia”–which can include neon signs, hoodornaments and other accoutrements.

Hagerty also has coverages to suit businesses around thehobby–such as classic car museums, dealerships, builders andvehicle restorers.

Looking forward, Mr. Hagerty said the biggest challenge willlikely not come from cyclical economic downturns but possibly fromlegislation or regulation.

People do not target collector cars for legislation andregulation intentionally, but some environmental benchmarks forautomobiles could unintentionally sweep up those in the hobby, heexplained.

Mr. Hagerty said it is important for those in the hobby to stayinformed about the potential fallout from such regulatoryinitiatives, and work to get exemptions for classic cars when thetime comes. Hobbyists have been successful getting exemptions inthe past, he said, citing emissions testing as an example.