Pride and joy

There are an estimated 600,000 classic cars in the UK. These are often owned by older motorists but, increasingly, younger drivers are collecting what they hope will be future classics.

And, with a 'classic car' usually accepted as one over 15 years old, that can include quite a few modern icons. Also, there is no road tax charged on vehicles registered before December 1973 - a small but worthwhile benefit.

For insurers, classic cars pose a number of challenges - none insurmountable, but all needing to be taken into account.

Paul Matthews, managing director of classic car specialist broker Footman James, says the key is to understand that, for owners the classic car is their "pride and joy" and therefore insurance services need to tailor the price, cover and service to exceed their expectations.

He says the majority of classic car schemes are designed for true enthusiasts where classic cars are used on a limited mileage basis and are usually not their main mode of transport.

John Border, motor schemes manager at Allianz Cornhill Personal Lines, says: "In truth, they probably don't need a special policy but, as a niche, classic car owners like to feel that they are being treated in a different way to the average motorist.

"As classic car business tends to be profitable for insurers, it is worth creating a special policy to cater for their special needs." Classic car owners tend to garage their vehicles, and spend a significant amount of time in maintaining and generally looking after them. They really are their pride and joy.

On this basis - and the usually limited usage of such cars - insurers have a lower exposure to the normal claims risks they face and can provide lower rates than normal private car rates.

Loss ratios can be exceptionally lower than a normal private car book of business. Brokers need to understand the market and work with good insurer partners.

Nigel Bartram, motor underwriting manager at Norwich Union, adds that for a car to be classified as classic for insurance purposes, it needs to be "a hobby vehicle, not the main vehicle in daily use".

Also, because there are not the ready price guides that might exist for other categories of car, "residual values have to be agreed".

The real value is often more emotional than intrinsic, reflecting the love of the vehicle and the care that has been lavished on it rather than the sum of the prices of its parts.

And a classic car may have value in its provenance. Border says: "John Lennon's 1963 mini would be worth much more than a similar vehicle owned by me, for example."

Furthermore, many owners will only wish to be able to purchase new parts after a claim. They'll want to fit them in their own workshop because they are experts on their own cars.

An owner is welcome to use a classic-type vehicle for daily transport but, in that case, it probably wouldn't qualify as a classic car for insurance purposes and the insurer would not agree a total loss value in advance.

Even when not being used on an everyday basis, it is some of the everyday realities of modern driving and life that figure high in the underwriter's concerns when calculating the risk element of classic car cover.

Many classics have brakes, steering, even gear changes that were designed for less demanding conditions than today's traffic.

So the driver of a classic car has to drive within the performance parameters of the vehicle and even then there is the risk that other drivers might not realise the limitations of the classic car adjacent to them on the road.

More unpleasantly, there is an element in modern society that, on seeing something that is nice and clearly valued, wants to damage it or steal it.

Classic car drivers require vehicle recovery because they often prefer a tow home (where they can make their own repairs) to a local repair, even if such a thing is available, which for these cars is not often.

Very few classics require special security - garaging is normally sufficient - but where the car is of exceptional value, an insurer may require the same sort of special protection associated with 'super cars' although electronic devices such as trackers can be harder to hide with their new wiring standing out from the older loom on most classics.

Brokers need to know their market, which is always true, but more so in a market such as this where a great deal of business is done through club schemes and with brokers who are felt to 'understand' classic car buffs and their vehicles.

As Matthews puts it: "Classic car owners want to talk about their pride and joy and ensure that there is a level of expertise in the broker that will ensure if anything happens their vehicle will be covered and repaired to the original condition."

Bartram adds: "It's about a level of expertise. People need to know that the broker understands the vehicle and the market. For this reason, a lot of owners' clubs will have a connection with a trusted broker or, if the club is large enough, a scheme."

While racing is not covered under a normal policy, some timed road events are okay (especially if organised by an owners' club that has a good relationship with its broker/insurer), but it would be best to inform the insurer before any such participation.

Use for hire and reward, such as weddings, and using cars in 'drive-on' parts in television or movie productions will almost certainly need an extension of cover.

Membership of an owners' club often attracts discounts because members tend to be dedicated to the brand and their cars, to be hobby rather than daily-use orientated, and are knowledgeable about their vehicles.

And because the classic car market has spread to include quite modest vehicles owned by ordinary folk, this is not a market that only caters for the high net worth customer.

It is still a specialist market but not one in which a broker should fear to tread as long as he or she is prepared to know the subject and has a liking for classic cars.