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Car values and insurance

20 June 2017

In our very first newsletter back in 2014 we talked about the recovery in values from the previous peak. At the end of 2014 many industry experts predicted that the “bubble” was about to burst but the market surprised everyone by continuing to move strongly upwards through 2015 and 2016.

When we have a strong market a number of trends become apparent some of which affect insurance. The finest cars always seem unaffected by almost anything that happens in the world and continue to climb in value. There is a huge amount of money out there chasing too few of the very best cars which has an effect on lesser models in a manufacturers range both new and classic.

The obvious example is Ferrari, the 250 GTO (39 made) being virtually unobtainable because their owners will not part with them, although unusually there is one currently available in the UK. Next up is the 250 SWB (168 made) and we have seen a number change hands pushing the value of the best factory competition cars up to the £10m mark. The 275GTB (454 made) also became a target with values doubling pushing the best examples close to a current level of £3m. All this affects the values of lesser cars through the classic chain down to the 308GT and 400.

Manufacturers have capitalised on the demand for these limited production runs of desirable cars and created the “instant” classic. Ferrari produced 599 of their 599 GTOs which set the trend and which have completely outstripped the value of the standard 599GTB. Currently Ferrari are releasing the TDF version of the Ferrari F12, and if you are one of their regular customers you may have been fortunate enough to have been “invited” to buy one of the 799 being made at a list price of c£400,000. They are currently trading at around £900,000, so an incredible investment.

There has often been a premium on the latest and most desirable car from a manufacturer paid by people who want to be seen in the latest model. Once production comes on stream the values sink back to normal, but that is not happening with these highly priced limited edition supercars. Most insurers will not cover these inflated values and won’t give Agreed Values anyway on cars less than 10 or 15 years old.

At CIS we don’t have those restrictions but insurers are concerned that the value on these cars might collapse so they will only insure them initially on a market value basis. We can however cover them at the higher value beyond the list price but the insured would have to substantiate that market value in the event of a loss. We don’t really anticipate any issues in the event of a claim because in the case of the TDF for instance we already insure half a dozen so we have a firm handle on their current values.

Apart from new, instant classics, manufacturers are recreating older classics from unused period chassis numbers. Aston Martin did this of course some years ago with their Sanction II Zagato which has appreciated greatly in value since. They are now producing a number of the classic lightweight DB4GT for racing and Jaguar are doing the same with a limited number of the XKSS but all with a seven figure price tag. These cars will initially have to be insured on a market value basis before going on to an Agreed Value.

These multi-million pound vehicles are usually in first class condition, but further down the line this may not be the case. The difference in value on any given car can of course vary enormously depending on the exact model description, condition, mileage, colour and on the more modern classics whether its LHD or RHD Insurers are becoming much more aware of these nuances and this is why we get a simple form completed to get more details of the car. Many insurers insist on photographs and rely on them to substantiate values but we have seen some poor photographs of great cars and conversely good photos of poor cars usually in the sunlight after having been sprayed with water. Some insurers have discovered they have even been given photos of someone else’s car in better condition and with the number plate obscured! Insurers, uniquely allow CIS to agree multi million pound values knowing that we have our own database of similar cars and have access to over 600 specialist motor traders dealing in some pretty esoteric cars.

Restoration costs have risen over the last few years and we are seeing a repeat of the situation in the early 1990s when many cars were being restored on the expectation that values would continue to rise. We see many examples of cars which have been restored regardless of expense so that the overall costs exceed the current value of the car. Indeed some companies offer the whole package of a donor vehicle plus nut and bolt restoration to as new condition but this can result in something like an E Type Jaguar costing over £250,000.

We have always had the situation where someone has found their first car or their father’s first car and had it restored regardless of cost and for those situations we devised cover based on Reinstatement of the car rather than an Agreed Value. On an Agreed Value basis in the event of severe damage the insurer will pay the full sum insured but then the salvage becomes their property. On a Reinstatement basis the owner can elect to use his sum insured to have the vehicle restored to the same condition as it was in prior to the loss and so salvage is not an issue.

Many non-specialist insurers and brokers are coming into the specialist market quoting some incredibly low premiums. Apart from not understanding the classic car world and being inflexible in client’s needs the problems usually start when a claim occurs. We recently came across a situation with a young man insured not with us, but with a well known TV advertised insurer. They had agreed the value on an older 500 series Mercedes at £15,000 issuing him with their own branded certificate of Agreed Value. He had a non-fault accident and they offered him cash-in-lieu of repairs because they said parts were not available. We rescued the situation by getting the car repaired through one of our specialist trade clients but it did seem to us that the insurer was trying to take the easy way out and avoid their obligations under the policy.

The moral of these stories is that you should always insure through a specialist and in a rising markets like this should address the value of the car periodically not just waiting for renewal.

At Classic Insurance Services, we always like to keep up with the latest news so we can provide the best insight and knowledge to our clients.

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