While the struggling economy has left its mark on virtually every line of property and casualty insurance, the collector car niche remains stable and is even growing, as carriers look to associate with known players in and out of underwriting to win over enthusiasts, according to professionals in the field.

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

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

Still, Mr. Hourihan and Mr. Hagerty agree their firms have not seen too negative of an impact as a result of the poor economy.

Mr. Hourihan said the same people who needed coverage in past years require insurance today–and as the economy improves, values will move upward again. AIU, he added, is still binding and issuing policies, 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 likely sell other possessions before giving up their collector car, making for a “relatively stable” market.

Collectors also recognize the significance of having insurance and getting protection for their vehicles, according to Mark Plousis, vice president for diversified products at Philadelphia Insurance Companies in Bala Cynwyd, Pa.

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

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

He also said insurance coverage is not just a desire for collectors but, in many jurisdictions, a legal requirement as well.

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

The typical pattern, according to Mr. Hagerty, is that a new entrant comes into the market with lax underwriting standards and tries to lower prices to buy up market share. What these entrants do not understand, he explained, is that repair, restoration and other costs for this niche have been increasing over the last 5-to-10 years.

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

Reaching the collector car community is another challenge for insurers. One way to overcome that obstacle is to partner with a name already established within that community. For Philadelphia Insurance Companies, that involved purchasing the book of business of Grundy Worldwide, also in the Philadelphia area, which has been serving the collector car market since 1947.

Mr. Plousis said partnering with a brand name like Grundy eliminates some of the barriers to enter this niche marketplace.

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

AIU Private Client Group's partnership with Barrett-Jackson is different in that Barrett-Jackson is not a provider of insurance and does not have a hand in underwriting risks. However, the value from the partnership, explained Mr. Hourihan, is in the firm's endorsement of AIU Private Client Group's insurance products.

AIU's Private Client Group, Mr. Hourihan noted, had been in the collector car market for almost 10 years, but the recent partnership with Barrett-Jackson opens up new opportunities from a marketing standpoint, while providing an avenue of access to thousands of collectors.

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

Aside from partnering with an existing name, pros in this tight-knit market said it is important for companies and agents alike to get out to car shows, rallies and other collector-attended events to establish their presence and credibility.

Ultimately, regardless of partnerships and market conditions, success for insurers comes down to providing products collectors want. Mr. Hourihan said AIU offers an “agreed-value” policy that can cover up to 150 percent of stated value at the beginning of the policy. The policy provides roadside assistance coverage that includes flatbed towing. The coverage is also worldwide, as opposed to 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 to show their vehicles.

Philadelphia Insurance Companies does not have mile restrictions on its coverage, according to Mr. Plousis. The policy also adjusts the vehicle value to keep up with inflation, and includes trip interruption 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 offerings and broadening core products. One newer policy he cited offers coverage for “automobilia”–which can include neon signs, hood ornaments and other accoutrements.

Hagerty also has coverages to suit businesses around the hobby–such as classic car museums, dealerships, builders and vehicle restorers.

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

People do not target collector cars for legislation and regulation intentionally, but some environmental benchmarks for automobiles could unintentionally sweep up those in the hobby, he explained.

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

Special Reports /

Collector Car Niche Rolling On Despite Economy As Insurers Seek Brand Support

Related Stories

Recommended For You