High-value cars - Buckle up

There are still relatively few insurers and brokers that specialise in the high net worth motor sector. This is at least partly due to the expertise and experience required to write the book effectively rather than because it is a particularly high-risk area. In fact, despite public perceptions of boy racers and their sports cars, in many ways this is a peculiarly stable market where the insureds tend to be risk averse.

Owners of high-value cars rarely have just the one vehicle, as Damian Keeling, managing director of Cumbria-based broker Peart Insurance explains: "It is quite common to find that insureds have one car of over £70,000 and another worth between £50,000 and £70,000. A typical mix would be a Range Rover and a Ferrari."

There is an assumption that these types of cars must be costly to insure but commonly the premiums are in the hundreds rather than the thousands. Insurers will, though, expect car owners to have invested in the relevant security systems. Mr Keeling comments: "We would expect anything over £50,000 to have a tracker on it, while if you have a car worth over £70,000 then it is pretty much uninsurable without a tracker."

The good news is that the basic systems tend to come as standard; alarms, immobilisers and trackers are often built into cars in this bracket. However, insureds may need to check that security devices are of the standard required by the insurer. For example, while some trackers will simply tell you where your car is, others will alert you if someone moves the car without the key in the ignition. "Some insurers have particular demands where trackers are concerned," explains Mr Keeling.

Individual

It is difficult to generalise on insurers' requirements as much of the market is still written on a case-by-case basis. As Hiscox's head of motor, Ashley Cole, observes: "Underwriters will look at cases as bespoke." Simon Reid, senior motor underwriter with AIG, agrees: "Nothing is set in stone. We look at every case and every client on its merits."

This makes it equally difficult to make assumptions about premiums. In addition to the car's security, factors such as age and experience will of course come into play. AIG takes an holistic view of each personal factor, emphasising its approach to client underwriting. "If a client has a household, a yacht, an art collection and so on, then they are likely to get a good deal from us on motor," says Ann Owen, who heads up the insurer's private client group.

So do insurers penalise those that fail to implement the required risk management measures? "It's no secret that those without security will pay a bit more, simply because they attract greater potential for theft," comments Cole. He adds a more important issue is that those without good security will have fewer insurers available to them: "You are narrowing your insurability in effect. That is a more significant issue than how much you are going to pay."

The use of systems like trackers and alarms and growing awareness about safety, means that theft is not a significant claims trend. "Theft of high-value cars is quite rare," reports Mr Keeling, adding that in his experience most claims involve third party collisions.

That is not to say, however, that theft has been eradicated in this sector completely. "Cars with tracking devices still get stolen," observes Reid, who goes on to explain: "As in any area of motor insurance, the risk of people hitting each other is likely to be the most common cause of claims."

Cole points out that chauffeur-driven cars are likely to present a better risk. In addition to being professional drivers, chauffeurs tend to sit in the car rather than parking and leaving it. He observes, however, that few insureds actually employ chauffeurs. Reid agrees: "We do come across chauffeur-driven cars but it's probably less than 5% of the book." Reid also says that where sports cars like Ferraris and Aston Martins are concerned, "people don't buy cars like that for someone else to drive them."

Service requirements

As regards customer service, there is a consensus that clients are looking for personal contact but also speed of delivery. Cole explains: "Generally, the owners of these sorts of cars, especially if they have two of them, tend to be particularly time poor and cash rich. They want a broker that will come up with the right solution but they do not want to be overloaded with paperwork."

According to Keeling, owners of high-value marques change their cars more often than owners of standard models, which means the broker is inevitably in regular contact with the insured: "You have a lot of conversations with them about what the next car is going to be. They also expect you to know what you're talking about."

Keeling points out that initiatives on the part of car manufacturers like Bentley have increased the market for high-value cars; some of the large insurers are also stretching their range to the lower end of the high-value market. Yet as with many specialist sectors, while this is an attractive market it is also a difficult one to broker or insure effectively without the right skills. Mr Keeling observes: "We have seen some insurers expressing an interest and maybe even dabbling in it, though it is often a short-term thing as it is quite hard to underwrite."

When asked whether or not predictions of a recession are likely to have an adverse impact on the high-value motor customer base, most insurance professionals are pretty optimistic. "We tend to operate in the higher end of the high net worth market, so any sort of credit crunch is unlikely to affect the clients on our book," explains Owen.

One of the traditional problems for both insurers and brokers alike has been a lack of awareness among car owners about the availability of niche or specialist providers. This, however, appears to be changing. "People are increasingly aware of the specialist products out there," emphasises Reid. Many brokers are particularly proactive in promoting their services through magazines or owners' clubs, although the most effective promotional tool continues to be word of mouth.

As a general rule, high-value cars have relatively little exposure to the road and those that do drive them are careful and experienced. For those with the relevant knowledge and expertise, this certainly appears to be a robust sector in which to specialise.

KEY FACTS

What is a high-value car?

Traditionally, a high-value car would be defined loosely as one with a price tag of around £50,000, although this is now drifting up towards £70,000.

Size of the market

This is still not a big market in terms of the numbers of cars on the road. Damien Keeling, managing director of Peart Insurance, estimates that 0.1% of the whole car market comprises very expensive cars.

Average premiums

Mr Keeling explains: "For an average customer aged around 48 years with a good driving record, you are probably looking at around £500 to £600 for a higher value Porsche. Or around £800 to £1,000 for a Ferrari."