A surge in classic car values—primarily due to rising inflation and exchange rate variability—means that owners are facing insurance-related issues.
The global classic cars industry was estimated to be worth $31.1 billion in 2021 and is expected to be worth approximately $51.3 billion by 2028, according to a report by Credence Research. The U.S. accounts for the largest share of this market, generating an estimated revenue of $15 billion in 2020, which is projected to grow to $19 billion by 2024, according to Statista. Based on these numbers, America's affair with classic cars is a love supreme.
Yet, despite this impressive growth in revenue, classic car enthusiasts are dealing with what many in the insurance industry are facing: a hard market. Further, a surge in classic car values—primarily due to rising inflation, as well as exchange rate variability that is having a major impact on the more expensive cars traded globally—means that owners are facing insurance-related issues.
“The classic car insurance market is being affected by the larger hard market in general," says Bryant Kolle, regional vice president, Hagerty. “On the high-net-worth side of the market we are seeing unbundling at an unprecedented rate and as more carriers non-renew risks that were once bundled together, brokers and agents are needing to find places for these cars."
In addition, many carriers face losses from natural disasters, construction costs and inflation and have been left with limited financial options in recent years. “One option for carriers is simple: to take more rate to offset losses—this is not ideal for the consumer who doesn't want to pay for others' losses," says Joshua Grundy, director of new business development, Grundy Insurance. “The other option is to take more care when underwriting and limit your exposure upfront."
This is where the expertise of an independent agent specializing in this niche market can really come to the fore. Agents can best serve clients “by working with insurers that specialize in collector cars because these companies better understand values, the industry and the unique differences between collector cars and standard auto," says Rick Drewry, senior training specialist, claims, collector vehicle and motorcycle, American Modern. “Classic car values go up and down alongside fluctuations in financial markets and agents can better anticipate clients' needs by keeping an eye on broad economic trends."
In addition, “it's important to work with a carrier who understands the nuances of the collector car market, has a track record of excellent claims paying, and can help to establish the replacement value of the vehicle," says Tim Dadik, national classics leader and western agency experience manager, Berkley One, a Berkley Company. “It is important for the carrier to have a claims department in-house to help make the experience seamless. Some carriers are part of a much larger organization, and a client could experience multiple parties and lengthy settlement times."
In specialized markets like this, classic car insurance provides specialized coverage options tailored to the needs of classic car owners. This was especially apparent when a classic car enthusiast purchased a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupe for $142 million at an auction on May 5, 2022, at the Mercedes-Benz Museum in Stuttgart, Germany. This sale has been reported as the highest price ever paid for a car at auction, smashing the previous record by more than $90 million.
Essentially, “values for classic cars increased between 20-50% for a lot of vehicles right after the pandemic with our top 100 most-insured vehicle types seeing a significant rise in value from 2021-2022," Kolle says. “Agents need to understand that unless they have changed the values on these vehicles recently, they are likely very underinsured. In the event of a claim, that is a big part of claims disputes when values haven't been raised in years."
Most importantly, when working with a client with a classic car, agree upon the value for which the vehicle will be insured. “Getting the appropriate coverage comes down to one thing primarily: agreed value coverage," Grundy says.
“If the vehicles remain on an actual cash value (ACV) policy, that will complicate matters, as recent comps might not be able to establish a satisfactory value for the owner and their vehicle," Kolle adds. “You want agreed value coverage (AVC) for these generally appreciating assets and make sure the values remain accurate through annual check in with clients. Make sure to utilize tools available to agents to check on clients' values."
“Values are the most common coverage gap," Dadik says. “The more knowledge an agent has on vehicle conditions and how to properly value a vehicle, the easier it becomes to help establish an accurate agreed value amount."
Over the next five to 10 years, the market will continue to grow and evolve. One area for agents to consider in addition to classic cars is the collector truck market. “The collector truck market is very strong, and it is a good segment of the hobby to participate in," Drewry says. “The number of collector truck enthusiasts continues to grow, and vehicles are available at the entry level all the way up to trucks valued at $100,000 or more."
“Between trucks and modern-day muscle cars, the hobby represents a tremendous opportunity for agents, which should continue for the foreseeable future," Drewry adds.
Olivia Overmanis IA content editor.
