The classic car market is fabled for its stability and consistency, but it’s still vitally important for us to keep up with emerging industry trends, changing customer preferences, and of course, evolving broker needs.
With that in mind, we sat down with our Senior Enthusiast Underwriter and classic car expert, Steve Simpson, to learn about what he’s observed in the market during 2019, and what we might be able to expect from the year ahead…
Steve, how much has the market changed during your time in this role?
Well, the first thing to say about the classic cars market is that it’s always growing. If you define a classic as anything over 20 years old, then each year brings new entrants. But of course, all of the old vehicles are still out there too, while we also offer ‘modern classics’ business for vehicles that are less than 20 years old but are still highly collectible. All of which means that enthusiasts checking out the market for the first time will find themselves in an ever-expanding playground.
What about in terms of investment values?
Over the past 10 years classic car values have been consistently going up, outperforming just about everything except perhaps vintage wine. I’d argue that classics are a better investment here too, as it’s at least possible to use them without instantly destroying their value!
However, at the top end of the market – the Lamborghinis, Ferraris and suchlike – it looks as though we’re finally seeing the pace slowing and interest levels cooling.
One element of this could be uncertainty. When it comes to high value classics, it’s a global market, and investors may simply be less prepared to spend big at a time of trade wars and uncertain future trading arrangements.
So do you see this as a temporary cooling off?
Well it certainly doesn’t look like a repeat of the early-90s bubble, so I’m not expecting to see any of the aristocracy dismantling their vehicles and attempting to claim for theft anytime soon.
Ultimately, people who want to make a return rarely buy at the top of the market, so I’d say what we’re seeing now is actually investors showing sense and looking in different directions for the next big market riser. Someone who invested in a Porsche two years ago, for example, might today be considering options beyond the prestige classics space, or perhaps a more recent vehicle.
If you were an investor, what might you be considering right now?
I think I might struggle to stump up the cash, but if I was speculating on what might appreciate the most, I’d be tempted by the ‘hot hatchbacks’ of the 1980s and 1990s. Cars like the Peugeot 205 GTI and Lancia Delta look to be performing particularly well, probably because the teenagers who craved these cars first time around are now old enough to go ahead and buy them.
And how about in the next couple of years?
It’s logical to expect that this trend will continue as more enthusiasts ‘come of age’, so I’d be looking to the next wave of cars from the mid-90s, such as the Lotus Carlton, Honda NSX, or perhaps some BMW 8 Series’. Again, we’re moving out of the prestige space and into more affordable, performance orientated classics.
There’s been some suggestion in the media that the next growth trend might be cars from classic video games?
It’s not something we’ve seen as of yet, but it wouldn’t surprise me. If you grew up in the 1980s its possible you were influenced by the Miami Vice poster you had on your wall with a Ferrari in it. In the 1990s and beyond, video games could definitely have played their part.
Turning to brokers, are there any changes to the sort of requests they’re sending your way?
We have a lot of very strong broker relationships and so this tends to result in an extremely stable classics book. But we’re certainly seeing a trend towards more multi-vehicle policies, which is something we have a lot of appetite for.
We also find that once a broker has placed an individual client risk with us, a few more often follow very quickly – particularly as we are able to add new vehicles to existing policies. One case, that began with us underwriting a Mazda MX5 back in May, has since led to our broker’s client purchasing a further 40+ classics in less than six months.
Does this type of thing happen because it’s just so difficult to insure some of these classic autos?
Well, that’s quite an extreme example! But I do think that, sometimes, when a client realises their broker has found them a good deal with an insurer that genuinely understands what the car is and what it means to them, it acts as a motivator to step up their enthusiasm and pursue the hobby to the max.
The only problem comes if the insurer turns out to have a limited risk appetite. For example, an existing client goes out and buys a multi-million pound vehicle midway through their policy, only to find that the insurer isn’t able to cover it.
Is this ever a challenge for an insurer like ERS?
Fortunately, our own risk appetite has continued to grow. In fact, we’ve not yet come across a collection so highly valued that we couldn’t quote for it.
In general, I’d say we’re very positive about the market at the moment. In 2020 our message is clear: we’re open for business, both to working with new brokers, and to doing more with our existing ones.
The Enthusiast space certainly seems to be delivering for insurers and brokers alike. Are there any potential headwinds brokers need to consider?
Because of the bespoke nature of the market, it’s important to keep your ear to the ground. As the market shifts, some challenges become less relevant while others become more pressing.
To give one example, we’ve heard concerns that enthusiasm for classics such as Austins or Singers is waning, simply because they’ve traditionally appealed to a demographic that is now quite old.
Consequently, car clubs are doing everything they can to get younger people engaged, which creates a different type of insurance challenge.
We have to make sure it’s a young classic car enthusiast and not a young driver who has bought a ridiculously old car on the cheap. But even with the former, it can carry a hefty cost, so we have to look for ways to try and bring the price down, like warranted accompanied driving.
Finally, are there any other trends we should look at in 2020?
Originality continues to play a key role in dictating classic car values – hot hatchbacks are a good example of this, as are ‘barn finds’. I think this is only going to continue in the year ahead, especially if you can combine originality with low (i.e. showroom level) mileage.
One area where talk is yet to translate into a real trend is around electrified classics. The UK Government has consulted closely with the classic car clubs, who don’t want to see older, less environmentally-friendly vehicles taxed to oblivion. These cars may not be as efficient, but they’re used so sparingly that I think it makes sense for policy efforts to continue focusing more on everyday vehicles.
