For insurers of collector cars, staying on top of generational trends and increasing awareness among prospects about the unique value of their specialty coverage remain the top challenges in this growing niche, according to experts in the field.

With the number of collector car owners on the rise due to networking over the Web and retiring baby boomers with disposable income, the pool of potential insureds has increased in recent years. Additionally, as new generations of consumers enter the market, their tastes are expanding the types of cars that are considered “collector-worthy.”

Previously, parameters established by the collector community used to dictate that cars needed to be a certain make, or a certain age to qualify as a collector car, according to Laura Bergan, vice president of marketing at American Collectors Insurance, a Cherry Hill, N.J.-based managing general agency that provides collector vehicle insurance. “I would say that those days have passed,” she said.

In fact, Ms. Bergan said that a car does not even have to be old to be considered a classic. American Collectors, she said, will consider insuring cars as recent as a brand new Ferrari, if it is clear that the car is not used as a daily driver vehicle and that it will appreciate in value over time rather than depreciate–a key factor in distinguishing a collector car.

When it comes to insuring collector cars, or even determining what qualifies as a collector car, it is more about the people involved in the hobby and what is in demand among that community.

“We look at the person's attitude toward the collector vehicle,” Ms. Bergan said. “One person's Porsche is another person's VW Bug. And we're not here to judge the vehicle.”

Mark Plousis, vice president for diversified products at Philadelphia Insurance Companies in Bala Cynwyd, Pa., agreed, saying that determining what is a collector car, in addition to determining the value of modifications made, has a lot to do with supply and demand, or “what's hot in the marketplace.”

He also said that generational issues come into play, and he noted that what applied to previous generations may not apply to younger people entering the market. “We still continue to see new segments every year,” Mr. Plousis said.

One such trend, he said, is the prevalence today of muscle cars in the collector marketplace. He said insurers are starting to see 25- to 30-year-old vehicles such as Camaros, Trans Ams and Chevelles as opposed to just cars like a 1955 Chevy.

“A lot of baby boomers for the next 15 years will be retiring, and every one of them kind of wants to re-live their youth,” he said. “Everybody wants to go out and get that car that they wish they had in high school, and now they can afford to do it. They have the time and money, and we still see that as a continued driver [in the collector car marketplace].”

Ms. Bergan pointed to another trend called “restomods” that she is seeing among collectors, with people taking vehicles from the late 1940s to the late 1950s and updating them so that they can be driven with a greater degree of comfort and safety.

As an example, Ms. Bergan pointed to the chairman of American Collectors, Thomas Kanyuk.

“The chairman of our agency, who founded it in the '70s, was given a '57 Ford Fairlane, which was a numbers-matching, very rare, very original car, for his birthday this year,” she noted. “And he took one spin around the block with his grandkids in the back seat without power steering, without disc brakes, without seatbelts, and decided, 'There's no way in heck I'm going to keep this car the way it is.'”

Once again, the people in the marketplace and what is in demand determine whether modifications like this will increase or decrease the value of a collector car.

Donna Wares, vice president of agent marketing and channel development at Hagerty Insurance in Traverse City, Mich., said that judgment on the modifications is “in the eye of the beholder.”

Some see value in a car that is in original condition–what Mr. Plousis called a “Survivor car”–while others prefer modern conveniences.

Ms. Wares noted that some collectors who participate in tours may choose convenience over original condition. “There are tours that are 3,000 miles long,” she noted, and “collectors want to be able to have some comfort on those tours.”

The trend toward adding modern conveniences to collector cars also correlates with an overall greater desire among collectors to actually drive their cars, according to Ms. Wares.

“It used to be they would 'park and polish' [the cars],” she said, while now–especially among younger collectors–hobbyists want to drive the cars more on certain days, and they want conveniences such as air conditioning, tighter suspension and powerful stereos.

Staying on top of these trends is important not only for the hobbyists, but for insurers as well, according to Ms. Bergan, who cited it as the most important aspect of insuring collector cars because it helps carriers make the necessary adaptations to the changing market.

“We're extremely eager to spot trends like the restomod movement,” Ms. Bergan said. “We're really on top of that to see how we can tap into that market.”

And it is not necessarily easy to determine what may be a future trend. Ms. Bergan noted that it has been difficult to figure out what cars from the 1980s and 1990s might be considered collector cars in the future, for example.

All of the professionals interviewed by National Underwriter stressed the importance of immersing themselves in the hobby in order to understand changing trends and the needs of collectors.

“Because we are hobbyists ourselves, we attend all of the big shows, we attend all of the auctions, and we talk to our clients and ask them what they need,” said Ms. Wares. “We're always looking at what it is our collectors need, and we try to expand our product offerings.”

As an example, she noted that Hagerty has a new insurance product available for “automobilia”–coverage for items that auto collectors collect, such as a vintage gas pump, or a poster from an event, or other auto-related items.

She said that Hagerty will insure spare parts, whether they belong to the hobbyist's car or if the parts themselves are collector items. Hagerty will also insure the tools that the collector uses for the car, Ms. Wares noted.

American Collectors has added new coverages to its policy to adapt to the needs of hobbyists. “One of the most popular bells and whistles that we've seen is our towing and labor for collectors plan, which we call our TLC plan,” said Ms. Bergan.

The plan has three different tiers, she noted, including basic coverage such as towing and locksmith reimbursement. The highest level of plan, she explained, has features such as car show expense reimbursement.

Ms. Bergan said this level of the plan will cover the registration fee for a big car show if a customer who was planning on attending the show sees their car break down or gets into an accident on the way there. The plan will also cover the first night of a planned hotel stay if that fee is nonrefundable.

More so than extra coverages, however, collectors are looking for the essentials when purchasing a policy.

All of the professionals said the most important aspect of coverage, and the biggest factor that distinguishes collector car coverage from a standard auto policy, is the type of physical damage. Collector cars are generally insured under “agreed value” rather than actual cash value or stated value, as standard autos are insured.

“The agreed value is the only way to guarantee that the full insured value of the vehicle is going to be paid in the event of a total loss,” according to Ms. Bergan.

Insuring under agreed value is critical, Ms. Wares said, because collector cars typically appreciate or hold their value, whereas daily driver automobiles depreciate. She said the agreed value is “probably the most critical component for a collector” with respect to insurance.

When it comes to deciding on the agreed value, the customer usually knows best, noted Ms. Bergan, who said insureds generally have a better knowledge of the value of their cars than any appraiser.

Mr. Plousis pointed to how careful the hobbyists are about documenting any changes or modifications that would affect the value of the car. “They're proud of what they've done,” he said.

Ms. Wares agreed that clients generally understand the value of their vehicles, but she said Hagerty also has the largest database of collector car information in the world in case they need assistance.

“Because we're so immersed in the business, we know where to look to help a client value his or her vehicle,” she said.

Perhaps just as important as the coverage on the vehicle is what happens when that coverage has to be put to use.

Mr. Plousis called claims service “one of the most important things in this hobby,” and said his company works hard to build a reputation as an effective claims handler.

He said his claims department is staffed with “car people” who can appreciate the level of service collectors desire when something happens to one of their prize vehicles. “A lot of these cars are practically pieces of these people's family,” he said.

Ms. Bergan agreed, stating that in the event of a claim, American Collectors does not dictate where customers should take collector vehicles to be repaired. She said collectors usually have service providers and restoration shops in their area they are comfortable with, and American Collectors appraisers work with those shops to settle losses and to get the cars fixed.

If claims service and spotting trends are considered 1 and 1A, in no particular order, as far as top factors for insurers, then market penetration would surely be 1B.

Ms. Wares, who ranked insuring a greater percentage of collector cars with the proper coverage as Hagerty's main focus, said collectors immersed in the hobby understand what type of policy they need.

However, she noted there are many owners on the fringe who do not read collector car publications or attend shows, where insurance for the hobby is generally advertised. Many of these people, she said, simply insure their vehicles with a basic auto policy.

“I think the majority of business is on a regular-use policy, so that's really what we're targeting–those people who don't understand that need to have a collector policy,” Ms. Wares said.

The lack of awareness about the collector car insurance market may not only be with collectors, but with some agents as well, according to Ms. Bergan.

“The disconnect, we believe, sometimes is not with the independent insurance agent, but perhaps the captive insurance agent who maybe does not have the connection to this type of program,” she said, “so when someone comes to them with a collector vehicle, the agent will say, 'Okay, we'll throw it on your standard auto policy and you'll get a multivehicle discount.'”

However, she warned, these collectors may be unpleasantly surprised if they have a claim and only get actual cash value rather than agreed value.

Ms. Bergan and Ms. Wares both cited advertising campaigns in auto magazines not directly related to collector cars, as well as educating their agency partners as important initiatives to increase awareness about collector car insurance.

While owning collector cars is a satisfying hobby for a growing number of people, offering coverage for such vehicles is also satisfying to insurers, who are generally collector car enthusiasts themselves. Sometimes they see very unique collectibles come their way.

Mr. Plousis said he sees many common collector vehicles, such as 1955 Chevys and Corvettes, but in addition, “we insure the vehicle from the Chitty Chitty Bang Bang movie. And I always kid around and say, 'No, it doesn't really fly.'”