A recent report from Bloomberg warned motorists in Britain to brace themselves for another round of steep insurance rises as UK insurers continue to feel the heat from inflation. No corner of the market is exempt from the cost-of-living pressures impacting balance sheets and budgets alike - not even the classic car sector, despite the imagery of effortless, timeless glamour it invokes.
In fact, as highlighted by Mark Roper (pictured), MD of the classic car and motorcycle insurer Hagerty UK, the decision to purchase or insure a classic or collector car is inherently discretionary. It’s not like a standard motor insurance policy which people need for work or the school run, he said, and people in the market have the choice whether to buy that vehicle in the first place, and then whether to protect it with insurance from Hagerty.
“Those external factors which have been impacting all of us personally have certainly impacted the insurance industry as well, “ he said. “The cost of parts and labour has gone up considerably and so the average cost of a claim is much higher now than it was a year or so ago. And when the cost of a claim goes up, it often means the cost of a policy has to go up as well. That’s something we’ve been navigating very carefully in terms of making sure we’re managing our economics but also trying to keep the prices as low as we can for our customers and our members.”
Roper noted that the operational changes enacted by Hagerty UK earlier in 2023 were done to help it better navigate these tumultuous economic conditions. After 18 months in situ, he said, he was well-placed to understand the opportunities and challenges within the business, and what its growth strategy for the next five years needed to look like. It became clear that the insurer had to make a small number of redundancies, which was done in two phases – in February and April – and saw 11 people leave the Hagerty UK team.
“We needed to make sure we were focusing on the most important priorities and the things that were most meaningful to our customers and our shareholders,” he said. “That meant a slight pivot in some of the things we were doing which allowed us to make efficiency gains in our expenses which, in turn, enabled us to pass those on to our customers. So, it had an immediate payback in terms of our ability to manage our business on a cost-effective basis, but also, I believe, set us up for much stronger, long-term growth in the areas we believe are most important to us.”
Key among these areas for prioritisation is the growth of Hagerty’s insurance footprint in the UK and the building out of its membership strategy. Hagerty has firmly established itself as a niche classic car insurer in the UK, he said, but in order to get to the level of scale and growth it’s targeting, the business needs to reach more people. This can be done one of two ways – either by growing within your current wheelhouse or by diversification - Hagerty UK is pursuing both growth agendas.
“We’re growing organically by increasing our marketing presence, our media strategy and our event strategy – all things that will get us out there to get a new audience,” he said. “But we are also starting to diversify, not dramatically away from motor, but rather by looking at other parts of the classic and collector motor world where we haven’t necessarily been heavily involved previously.
“An example of that is modern classics. One of the biggest growing areas in the car collecting world now is those cars of the 1980s and 90s that wouldn’t usually spring to mind if you’re thinking about classic cars. Rather than e-type Jaguars or Aston Martin DB5s, the cars we’re now seeing becoming classics are ones like Escort XR3is and Ford Sierra Cosworths. And it’s quite logical because the people who typically have the disposable income to buy a cherished car are those in that 40s to 50s age range – and they grew up in the 80s and 90s admiring these cars.”
Hagerty UK recognised that it wasn’t as well geared as it needed to be to appeal to this new audience of collectors and to protect this new suite of classics. So, the insurer has done a lot of work within its existing products to make sure it can accommodate these more modern classics, he said, many of which have a very different risk profile to traditional classics – not least by being more powerful and crucially, being cars fit to drive every day.
These modern classics do more miles and do different kinds of miles to traditional classics, he said, and so the risk profile of the car and the driver is different which means the product needs to be finessed.
Another proof point of the changing demographics of classic car owners is the uptake of Hagerty UK’s online channel which launched in Q4 last year.
It was clear that not having an online solution would hamper the insurer’s ability to reach out to and engage with younger drivers, he said, as they expect to be able to buy or renew their insurance policies online, from anywhere, at any time. And so, Hagerty UK moved beyond its single-channel roots to set up its online quote and bind solution.
“Unsurprisingly, younger and newer collectors are choosing to go down that road,” he said. “And the beauty of that is that it does give us an enormous amount of data about this new audience. What we’re finding is that there is, on average, a 15-year age gap between customers choosing to use our online channel to buy their insurance and those buying from us via our call centre. For me, that really shows there is a new market out there we probably weren’t reaching before and that by having the right product and distribution solution, you can reach that new market.”
It has been a busy year for the business already, between the growth of this online channel, the official opening of Hagerty UK’s new purpose-built HQ and Clubhouse at Bicester Heritage and the success of the insurer’s most recent ‘Festival of the Unexceptional’ which was its biggest to date with nearly 1,600 cars and 3,500 people getting involved.
The insurer’s Q2 results were very solid, Roper said, and in the UK, it’s on track to deliver its biggest year yet in terms of written premium, revenue and new business customers. These key performance metrics are creating a solid foundation for Hagerty UK to continue with its strategic growth ambitions and to work towards the launch of its membership programme – which is projected for 2024.
“We’ve accomplished a lot in the last 18 months to two years,” he said. “And I’m very proud of what we’ve achieved and where Hagerty is now positioned in the UK. But there’s as much ahead of us as there is behind us to do and we’re looking forward to getting our membership programme running next year, to continuing to welcome customers to spend time with us at the clubhouse and to continuing to widen our insurance product set and footprint. Overall, I’m very positive that Hagerty will continue to go from strength to strength in the UK.”
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