Recession Gives Agents New Opportunity with Car Lovers

Agents can offer collector-vehicle coverage to customers as a money-saving opportunity that also will provide broader coverage more tailored to a collector’s needs.

Last month, firefighters saved a 1964 Ford Mustang convertible from a fire at a restoration shop in suburban Chicago. The car, the first of its make and model to come off the assembly line, was valued at $5 million. The blaze started in another classic vehicle, a 1968 Oldsmobile Cutlass, one of only 250 still in existence. That vehicle, in the final stages of restoration, was worth $75,000.

A collector car — whether it’s a late model Aston Martin that a James Bond fan might buy; a 1960s muscle car like a Pontiac GTO; or a vintage vehicle like a 50s-era Ford pickup — is almost always the most-prized possession of its owner. If someone’s most valuable possession is lost in a fire, woe to the insurance agent who underinsured it.

Agreed Value: Crucial for Collectors

These vehicles may have been covered by the restoration shop’s commercial insurance. But in many other cases collector-vehicle owners are filing claims with standard auto carriers and hearing the disappointing news they are receiving actual cash value (not agreed value) for their most-valued possession. Collector-vehicle insurance provides loss reimbursement based on agreed value.

For agents, there’s a lesson here.

Agreed-value coverage is typically a better fit for the needs of collectors than a standard auto policy. Agreed-value coverage pays the vehicle’s full-insured value (less the deductible). The insurance provider and the consumer jointly agree at time of policy issue on the value of the collector vehicle, based on pricing manuals, recent sales and other data. As the vehicle value appreciates over time, or restoration work is done to the car, the value may be adjusted upon request.

The competitiveness of today’s auto insurance markets has made insuring a classic car simpler than ever. Collector-vehicle insurance has grown steadily in popularity among car collectors. Yet, there’s a lot of room to grow.

Industry estimates are that only half of collector vehicles are actually insured with collector-vehicle coverage. And the world of car lovers is a big one: 7 percent of Americans own a collector vehicle, according to an estimate in the Wall Street Journal. That’s a market of 21 million people who spend their time and money on vehicles of all makes, models and types. It’s not just cars: Fire engines, military trucks and motorcycles draw collectors, too.

Those people have one thing in common: They buy a vehicle solely for the purpose of enjoying it as a valued possession.

What Agents Can Gain

Many insurance brokers are pleasantly surprised about how different a collector-vehicle policy is than a standard auto policy.

Here are examples of a collector policy’s appeal:

• Collector policies have added features of special appeal: automatic increases in coverage to keep up with inflation; flexible mileage tiers depending on usage; coverage for spare parts (which can be costly for classic vehicles); and the choice of a $0 deductible.
• Premiums can be much lower with a collector policy compared with a standard auto policy. The reason: collector policies restrict car usage to hobby use, which means the property/liability risks can be much lower than a daily-use car that is driven 10,000 miles-plus annually. Premiums reflect the lower risks.

Brokers are able to use the collector-car insurance sale as a way to build a closer bond and loyalty with customers:

• The demographics of car lovers appeal to brokers. For example, the 180,000 subscribers of “industry bible” Hemmings Motor News magazine own an average of 4.4 cars. These car lovers have an average household income of $139,000, a home valued at $385,000, and household net worth of $1.27 million.
• Americans love to spend time and money on their collector cars. An American Collectors Insurance survey of nearly 400 insured customers showed that car collectors spend an average of 25 hours per month on their hobby. They’ve got discretionary income: Hemmings readers spend an average of more than $6,000 yearly for car restoration work.

An agent who taps into that passion by providing a more suitable policy has a better chance to tap into the trust and loyalty of that customer. Plus, agents can offer collector-vehicle coverage to customers as a money-saving opportunity that also will provide broader coverage more tailored to a collector’s needs.

Topics Auto Agencies