Pulling power

Hundreds of thousands of caravans are privately owned in the UK but several caravan clubs have cornered the insurance market tapping into large databases of receptive members, including selling caravan owners pet and travel cover. The East-Grinstead-based Caravan Club dominates the towed caravan insurance market, insuring 135,000 out of around 330,000 in the market. The Caravan Club has placed its insurance with Royal-Bank-of-Scotland-owned affinity player Devitts for more than thirty years. Devitts, which has delegated authority for the scheme, places the business with Axa as the lead insurer, supported by NIG, Norwich Union and several Lloyd's syndicates.

Lesley Coell, head of insurance and financial services at the Caravan Club, says: "Caravanning is a lifestyle choice and gives you the freedom to go where you like, when you like."

Despite caravan insurance not being compulsory - a caravan is covered under most car insurance policies for towing risks - there are still opportunities for smaller brokers to capitalise on these mobile homes. Altogether, including static and towed caravans, there are around 800,000 caravans, according to 2003 statistics from the National Caravan Council. In 2005, 32,000 newly registered caravans hit the road.

According to Ian Drewe, managing director of wholesaler K Drewe Insurance, which services around 4000 brokers and agents: "Many owners, especially of older vans, don't insure, and those who do tend not to shop around like they would for car insurance - so there's earning potential in this market which many brokers overlook. It is a good source of revenue and there are more customers out there than you think." K Drewe, which covers both static and towed caravans, offers white-labelling facilities, and tailor made add-on and opt-out elements to cover, such as excesses.

Drewe warns: "Leisure business provides great opportunities, but you still need a strategic vision and development plan to work at it. Identifying a niche or scheme opportunity is about seeing a potential gap in the market which could be filled or managed more effectively than it perhaps currently is by a competitor."

Entering the market

Craig Thompson, marketing manager at Halifax-based broker Caravanguard, says there are around 25 main players in the caravan broking market. He warns: "The people who succeed in this market are those who know what they are doing. We have pulled out of doing business with brokers (as introducers) because of the implications of Financial Services Authority regulation and the cost on the administration side of placing a small number of policies with one agency." Thompson believes caravan clientele is divided into those in their 50s and 60s whose children have left home, and those in their 30s and 40s who are looking to go on holiday with their children. He says Caravanguard offer two types of cover. The most popular is 'market value cover', the second is 'new for old cover' where it will pay the new cost of the caravan for the first five years of its life.

One player that is entering the market aggressively is Swinton, via its scheme manager Safeguard. Originally an exclusive bespoke policy for motorhomes, Swinton began selling caravan insurance in April with Axa. According to Rita Sadler, manager of Safeguard's specialist unit for motor homes and caravans, Swinton is aiming to take a 10% share of the towed caravan market in the next five years, which is possibly worth £100m of gross written premium.

Swinton is formally launching the product at the Bolton Caravan Exhibition (CHECK) in January and is investigating options to extend its existing AA breakdown policy from motorhomes to caravans.

In addition to the brokers mentioned, there are offerings from Saga, for the over-50s, insurance giant Towergate and Caravanwise, as well as smaller brokers such as Firebond. Caravan insurers include NIG, Axa, Equity Red Star, Lloyd's syndicates and Royal and SunAlliance.

Practical considerations

There are several important practical considerations that brokers should be aware about concerning caravan ownership. There is no need for a specialist driving test or license in order to tow a caravan, as long as the combined weight of the caravan and car does not exceed 3.5 tonnes - the maximum authorised mass - and provided the length of the vehicle is no more than 7 metres and the width is less than 2.3 metres. This represents category B vehicles, which can be driven for all licenses taken after 1 January 1997. If the combined weight is greater than 3.5 tonnes, then a C1 license would be required via an extra driving test, except for pre-1997 driving license holders. It is advised that caravan owners should not tow a weight that is more than 85% of the car's kerb weight. There are also other restrictions too - it is illegal to carry passengers in the caravan while on the road, although pets are allowed. There are special speed restrictions - 50 mph on single carriageway roads and 60 mph on dual carriageways and motorways.

Loss ratios are, in the main, hit by stolen vehicles. What is the attraction for thieves? Prices of new caravans vary from around £5000 to £20,000, not to mention the value of the owners' possessions. The average premium is between £200 and £250 while, for static caravans, the premiums are cheaper. Thompson says that a more sophisticated approach to managing caravan risks has been taken in recent years.

According to Thompson, registered thefts of caravans had gone beyond 5000 a year. Double axle caravans are more sought after by thieves as opposed to single axle. Thompson says the four wheel caravans are four times more likely to be stolen.

As a result of the thefts, Caravanguard, which places all of its insurance through Royal & SunAlliance, helped create the Phantom - a 24-hour tracker device - which, according to Thompson, has helped the number of caravan thefts reduce from 5000 to around 3000. Thompson says: "Since the development of the Phantom, there have been a number of competitors entering the tracking device market." He adds: "We insist on our customers using the Phantom if the caravan is worth over £14000 with a twin axle, and over £17000 for a single axle."

Coell says: "Most accidental damage to caravans is caused by hitting gates and branches from trees. You need to be careful when towing or reversing. However, the largest cause of loss is theft."

Tight security

Rita Sadler, manager of Safeguard's specialist unit for motor homes and caravans, says: "I was initially nervous about moving into the caravan business because of the number of thefts. However, security has become tighter since the introduction of wheel clamps, hitch locks and tracking devices. There have been no recorded thefts of caravans where the wheel clamp sits in the chassis."

The caravan market is large and, despite market saturation, opportunities for the persistent broker are there for the taking, especially as a large minority of your existing customers may just well own a caravan, even though they may not want to admit it.

WEBSITES

www.practicalcaravan.com

www.caravanmagazine.co.uk

www.caravanclub.co.uk

www.caravanmagazine.co.uk

www.static-caravan.co.uk

CASE STUDY

- Drewe Insurance Brokers is a company specialising in the leisure market, with its core product being caravan insurance. Managing director Ian Drewe says: "There's a great deal of opportunity in this market and it needn't involve a major investment in either time or people. It's worth thinking about white labelling, which we count as one of our major successes, working with some of the largest brokers, banks and retailers, as well as smaller operations."

He outlines the advantages, and what you should take into account, from both the provider and user point of views:

- Brokers need to take advantage of every distribution channel. Offering a white label solution gives you access to the vast and usually robust customer data and marketing facilities of those you work with. Why lose business to the banks and retailers when you can get it back this way?

- Consider the set-up costs and your staff training and competency in what might be a new product for them.

- Carefully vet those coming to you for a white label service. A new start will obviously take time to build up. If there is already a block of business you should look at the volumes and profitability of the account and the experience and general efficiency of the operation. It might be tempting to look at everything as an opportunity but being more selective will reap bigger and quicker rewards.

- Be prepared to be flexible, to provide a bespoke product to suit individual needs but based on a strong and well-established product base.

- If you prefer to focus on your core business, and do not have the resources to handle other products, or do not have the volumes to attract an underwriter, then using a white label partner means you can still offer your customers a broad range of other insurances at a competitive price and possibly with enhanced commission.

You might consider a pilot scheme first, using a complete outsourcing solution. That way you get the full underwriting, administration and document production service and only have to market the product as your own and give a telephone number which goes straight to the provider. If that goes well and you want to bring it 'in house', then the previous comments apply.

The leisure industry is growing day by day. One way or the other, widening your offering in this market can plug the holes and bring excellent rewards.