A classic approach

At the click of a button, cars can be covered against fire, theft and damage.

Without having to flick the ignition, motor insurance is available day or night, thanks to the wonders of the worldwide web.

For the average two-car family, getting standard cover online or over the phone is a satisfactory and convenient way of buying insurance.

But, for "cherished, classic, kit, or custom-made cars" the composite market is often too restrictive and uninterested in covering more complex policies.

As a specialist insurance market. Lloyd's prides itself on being able to offer tailor-made products for collectors, fleet owners and experienced riders when others refuse to do so.

At Lloyd's the attitude to underwriting motor risks is a unique one.

"We treat classic cars in the same way as we treat art - beautiful things that people love to collect," says Robert Read, a fine art underwriter at Hiscox. "We insure some of the biggest classic car collections in the world, which fall outside the sphere of interest of most motor insurers."

Hiscox is one of few insurers to specialise in the collectibles market which includes cars, motorbikes and aircraft and covers collections with a $100m valuation.

Its product is so specific to "genuine" collections, whether they are owned by private enthusiasts or part of a museum collection, that it excludes third party liability. Instead, the policy simply insures against physical loss or damage.

These vehicles, like sculptures, architecture or fine art are: "Not just functional objects but objects of beauty which have a special value to them," says Read.

"Hiscox understands the classic car market, because we have been doing it for 20 years. Our underwriters have a really good appreciation of who is who in the market and the risks involved and, through Lloyd's, we have access to that business anywhere in the world."

If Lloyd's is the gateway to unique and revered car collections, what other advantages does the world's oldest insurance market offer to those writing motor business?

"What Lloyd's has brought is more flexibility and underwriting in its purest sense to the business and we think the framework of Lloyd's lets us continue to do business like that," explains John Josiah, a motor underwriter at Equity, which insures everything from commercial fleet to mopeds and articulated lorries, to classic cars and coaches.

As the biggest personal lines syndicate at Lloyd's, generating more than half of the premium income in the motor market, Equity Red Star is accustomed to exploiting the qualities that Lloyd's possesses in being able to offer versatile and bespoke motor policies.

"We benefit from that willingness to underwrite, that willingness to be flexible and that willingness to talk to brokers in the marketplace," Josiah says.

Motor syndicates are not only driven by Lloyd's central resources, its renowned brand, its network of global licences and the security of its central fund, but also the personality of a long established market.

"Lloyd's has always been about a relationship thing and I think that is where it has been successful in the motor market," says Chris Dixon, personal lines divisional underwriting director at Chaucer.

Chaucer has used Lloyd's flexibility to great effect, creating an innovative and diversified product range with eight specialised offerings.

This includes its standard private car insurance product and its non-standard private car policy, which covers those with adverse driving experiences, or imported vehicles.

It also encompasses its commercial vehicle insurance product providing operators and small business owners with specialised cover in a wide range of market sectors, together with motorcycle cover and its Taxi-marque product for taxi operators in rural and semi-rural areas.

"We have also delivered some slightly different products that are designed to meet particular needs," says Dixon.

"We did a rally car scheme through one particular broker which offered private cover for rally cars up until the moment the vehicle got to the start of the rally."

With the ability to offer products in a less volatile environment (regarded as an ideal method to balance the company's portfolio) Illium Managing Agency chose to extend its insurance offerings into the motor market.

The syndicate opened up a commercial UK motor book in January 2006 which combines a mixture of commercial business aimed primarily at the SME sector, and sits alongside its public and products liability business.

Colin Rogers, operations and marketing director, and one of the founding members of Illium in 2004, says the benefits of becoming the latest member of the motoring fraternity are already beginning to bear fruit.

"We have started to see orders on package business where we were writing general liability for the assured and now we are also writing their motor insurance as well," Rogers explains.

Part of the key to Illium's burgeoning offering is its claims service.

"We set up a specialist motor claims service for Illium where we are able to build personal relationships with the clients so they can pick up the telephone and talk about the claim with an underwriter. It is one of the areas where we see the added value," Rogers says.

"With personal line motor insurance you are essentially just buying a product off the shelf, but with commercial clients - because the makeup of their fleet will be different and what they do will be different - you need to look at everything individually," he says.

With a new syndicate entering the market, how does the sector compare to years gone by? Chris Dixon says motor at Lloyd's has reduced quite significantly in the past decade with players leaving the sector and a spate of acquisitions squeezing the market in size.

"Historically the motor market was prevalent at Lloyd's," he explains.

"At one point there were 48 motor syndicates but over time they have amalgamated or packed up.

"There are about eight or nine that now remain in Lloyd's and the premium income controlled between those syndicates is about £850 to £900m, which is about 6% to 7% of the overall motor market."

Dixon says success has been achieved through each syndicate diversifying and reacting to the changes in market conditions.

"Because we tend not to compete with direct lines head-on we all looked for diversification - whether that be in the fleet market or the personal lines market. We have done than in order to adapt and survive," he adds.

The release of disposable wealth, which has resulted in more people choosing to spend their earnings on classic cars, expensive motorcycles, or specialist, high-value vehicles, has also opened up the need for specialist, niche insurance.

But what are the future prospects for a small market with so few players?

"The market is very competitive at the moment in the mainstream private car market and that tends to have a knock-on effect in the specialist classes," explains Dixon.

"Private car insurers are not meeting business plans, so they are looking to specialist classes where they write business for a while and when there are losses they come out of it again," he adds.

As insurers respond and adapt their products to suit market conditions so too it seems does Lloyd's.

"In the past it has been more expensive to operate through Lloyd's as a motor insurer," says Josiah.

"Lloyd's has taken that on board and has given every indication that it is going to address what the minimum solvency level should be, which will hopefully lead to a more level playing field on a cost operating basis for motor syndicates.

"We believe that Lloyd's is beginning to understand the market more, that motor and personal lines generally are different to the more speciality areas of Lloyd's.

"Perhaps, with that in mind, it may begin treating it differently from the point of view of regulation."

With only five syndicates writing exclusive motor books and nine in total with a presence in the market, motor is a "tiny" component of the vast Lloyd's institution.

But Josiah believes the future for motor appears brighter than it has done for many years.

He says: "The environment is moving on to a place where perhaps Lloyd's would welcome more motor syndicates. It would certainly seem to be more welcoming from a cost point of view."