Richard Morley: The secret behind cost pressure-busting lower classic car premiums

The insurance industry is all too aware of the economic impact on the motor market over the last couple of years.

Factors such as inflation and the Covid-19 pandemic led to a sharp rise in costs and, in turn, an increase in premiums.

For example, according to market analysts EY, for every £1 in premiums collected in 2023, the industry paid out £1.13 in claims and expenses.

The good news is that premiums are starting to drop in 2024 – but not by much.

According to the ABI’s Motor Insurance Premium Tracker, published 5 August 2024, premiums paid by customers fell by 2% between Q1 2024 and Q2 2024 and currently sit at an average of £622.

Figures for the classic car market, however, are quite different. Richard Morley, broker director at Markerstudy Broking, explains: “We still see a large percentage of our customers paying less than £100 – pretty cheap.

“So, if it went up from £92 to £97, there is a percentage increase there, but it’s not the same as paying an extra £400, £500 or £600.”

Claims costs

Markerstudy currently operates in this specialty market through its classic car business Lancaster Insurance, which is overseen by Morley.

The broker has access to a panel of insurers that provide cover for classic car, vintage car and classic vehicle insurance schemes in the UK.

The statistics highlighted by Morley are impressive to say the least – and will probably make those in the standard motor market look on in awe.

What makes this more impressive is that the classic car sector is not immune from claims costs. According to Morley, “if you look at the average cost of claims in classic cars, it’s pretty much doubled” over the last four years.

Similarly to in the standard car market, economic pressures have led to issues such as parts being difficult to get hold of, or being slow to arrive.

But one of the reasons for higher costs is that, given a classic car is more of a collector item, customers are not as interested in how cheaply the vehicle can be repaired.

Morley explains: “It’s a classic car – it’s their pride and joy and they want it repaired as it was. It needs to be pristine.

“So, we offer the customer a choice of repairer – if they have a garage that is a specialist and local to them, we will let them use them.

“The pro is that you get the car repaired more quickly and its done by a specialist. It is [also] done to a higher standard.

“But that might come with a bit of an increased cost because they are a specialist – maybe the labour is a bit more expensive.”

However, he adds that this is a “really important” benefit to the customers.

“In a market where we’re here to provide the customer with a service and a product that fits their needs, having that choice of repairer is really important,” Morley notes.

“It might be a car left to you by your father in his will – you don’t want it written off because its got some superficial damage. You want it repaired and back on the road.”

Lower premiums

So, given economic pressures and the fact that claims can demand a high price in this market, how have premiums remained quite so low?

Morley explains that one of they key factors is the risk profile, with people who buy a rarer car seeing it as an investment rather than as a daily driver.

He says: “The risk profile is as important as standard car insurance in determining that price. A high value and rare classic car doesn’t necessarily equate to a higher premium.

“What we are looking for in our classic car schemes is somebody who has bought a vehicle as an investment or for the love of the car.

“So, they are not going to drive it to work and leave it in a train station. It’s going to be kept in the garage, kept in the drive and [is] probably restored.

“Therefore they drive it less and the frequency is lower.”

Morley also adds that while classic cars may be rarer, the insurance market for them is competitive, which can help drive down premiums.

He explains: “It’s a really competitive market – if you go on any price comparison website (PCW) and put in classic car risk, you’ll see 10 people trying to get your business at pretty low premiums.

“Thirty years ago, I started working in the classic industry and you would see premiums about £50 as a minimum. If you look on PCWs now, you’ll still find £50 premiums.”