Vintage, classic, or prestige cars – what insurance is available and what roles can brokers play in this sector?
The world of motoring enthusiasts who devote their time and money to collecting vintage, classic, prestige or race cars is vast. Did you know the Gosford Car Museum in a former Bunnings building in West Gosford houses a $70 million collection of more than 400 of the most sought after vehicles in the world?
Recently, it was reported that Perth classic car enthusiast Peter Briggs was hoping to get $1 million for his Bathurst-driven 1977 Holden Torana A9X racing car.
Chris Quick, Underwriting Manager at Dawes Underwriting, explains, “Car collecting is a big trend. Owners and enthusiasts are trying to capitalise on rare vehicles and others for investment purposes.
“The enthusiast and prestige niche market would be close to $500 million in gross written premium (GWP) between intermediated and direct business between motor vehicles and motorcycles.”
Clearly, the market to insure and protect them is growing.
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There are now many family events on weekends such as ‘Cars and Coffee’, where owners of special vehicles showcase their pride and joy. There are also the young enthusiasts who follow online trends and build project cars to certain styles.
And it is not just in the classic car market where you’ll find motor enthusiasts. Daniel Mcnamara, National Operations Manager at MB Insurance Group explains, “Brands such as Mercedes Benz and BMW are creating a new niche of luxury vehicles with the A-Class and 1-Series respectively. Sales of new prestige cars are at an all-time high.” According to the Australian Bureau of Statistics Motor Vehicle Census 31 January 2016, while Ford and Holden sales were down 18 per cent and 7 per cent respectively based on registration changes between 2011 and 2016, prestige makers have seen enormous growth, with highlights being Range Rover sales rising 158.9 per cent and Audi’s at +90 per cent.
Not all insurance policies have the same level of features and benefits, which is particularly important in the case of a prestige vehicle.
There are multiple drivers that have resulted in the growth of the segment. Australians’ taste in motor vehicles over the past 10 years has changed markedly, ultimately leading to the demise of local manufacturing. This change, has brought on the relaxation of tariffs etc to make owning a prestige car more affordable.
Brendan Marsh, Practice Manager, Motor Solutions, One Underwriting, believes that this trend will continue. “Whereas 10 or 15 years ago, the buying demographics were much simpler to identify (mid-executive level through to retirees), the relative affordability of prestige vehicles and manufacturers initiatives to push their model ranges downwards to fill gaps has changed the buying profiles of owners from mid-20s through to late-80s.”
Where do brokers fit?
For brokers, Mcnamara says: “There are great opportunities within the classic and prestige car insurance segment because this market continues to grow.
Marsh explains further, “First time owners are like new parents and require specialist advice from someone that has done it before to ensure they’re properly protected, price is always important but ensuring the cover reflects the risk is most important”.
Quick, an avid motor-devotee himself, agrees brokers can play an integral part in this process by selling an ‘end to end’ management of their insurance portfolio.
“If you have a client who deals direct, ask them how long [they] sit on hold when on the phone to [an insurance company] to make a change. Dealing with a broker can be a quicker process especially during the claims process.”
As experts, brokers can assist their client directly with expert advice throughout the insurance process.
Mcnamara believes that brokers can add enormous value. “They are able to identify all the risks a client faces and recommend a solution that suits both their client’s coverage and budgetary requirements, rather than simply focusing on price alone as many direct insurers do.”
Marsh also believes that brokers have a key role to play in this area even though over the past 15 years, brokers have become apathetic around domestic insurance and were happy to concede to the price driven direct market as it was too much trouble for too little return.
He explains, “Brokers need to genuinely understand their clients’ needs and be able to articulate that to us. The success of Shannons (a specialist car insurer), for example, is that they can underwrite the client before even getting to the vehicle, because they can speak to a client and judge their genuineness and passion about their hobby, collection and their vehicle.
Brokers can play an integral part in this process by selling an ‘end to end’ management of their insurance portfolio.
“From a broker’s perspective, they have the same opportunity, it’s about understanding that passion and the policy needs and communicating that to us in a one step removed situation.”
Quick also believes that brokers should have a quality conversation with the underwriters about their mutual client’s vehicles.
“The underwriters are here to assist and can help guide brokers and offer solutions to the end client,” he points out. “We understand there are people out there who aren’t into the motoring scene so dealing with a specialist agency will mean that you will deal with an underwriter who is an enthusiast and can help answer questions, chit chat about cars and just give straight general advice.”
Insuring a luxury car with the cheapest possible option is not always beneficial in the long term, particularly at claim time.
Mcnamara clarifies, “Not all insurance policies have the same level of features and benefits, which is particularly important in the case of a prestige vehicle. Some owners are fearful that insuring an old car will be expensive, yet in many cases it is cheaper to insure an older car than a modern one. Low and limited kilometre options are available if the car is rarely driven, further reducing the premium.”
Theft is a big risk, especially when it comes to rare and classic cars, Quick says. In addition: “I also believe as more cars become ‘tech savvy’ and automated this is certainly an emerging risk that insurers and agencies should start to take note of especially from a cyber and data point of view.”
Marsh cautions, “General motor insurance is designed and priced to appeal to current repair methodology on modern vehicles at volume level and simply adding a prestige, exotic or classic vehicle into the client’s fleet will only ensure difficulties should a claim arise when specialist practices are involved in repair, or worse dealing with a time poor assessor who just wants to write off a classic vehicle.”
In fact, Quick’s advice is that owners should take out a Comprehensive Car Insurance policy for their classic and prestige vehicles, even if the vehicle is rarely driven. “It provides peace of mind knowing that your car is covered in the event of a claimable incident.”