Car Features

Insurance: perhaps the most uninteresting subject you will find on these hallowed pages. Many will call it a necessary evil; even closing their eyes in defiant belligerence as they enter their credit card details. But what are you buying exactly?

My name is Kalen and I’m a recovering insurance industry worker. For my sins, I’ve done well over 20 years in the industry. I’ve worked on products, run service centres, call centres and even been involved in starting and running an insurance agency that marketed specialist motor insurance for modified vehicles. 

The content of this article includes snippets that I’ve shared on many occasions with friends and family over the years.

All of us viewing the pages on the Historic Vehicles website are multiple-vehicle owners: we have a daily drive and we have our passion vehicle(s) – cars, bikes or trucks.

So why should you care about insurance details? Well, your vehicles, regardless of type, are usually your second biggest assets. 

Ultimately, buying insurance is protection against loss that comes with either an incident, or theft. The loss can be damage to your, or another’s, vehicle or property; the latter where you are deemed to have caused the incident.

The level of care and passion for each vehicle will vary. You may not be really bothered by what happens to the daily drive, in which case you may choose to find an aggregator online, take the cheapest policy and hope for the best. 

But in the case of vehicles that are precious possessions, here are some things to consider.

Insured Value

You’re insuring an asset and the asset is worth something. Ultimately, the value or ‘sum insured’ is what you receive as a payout if the vehicle gets stolen and unrecovered, or ‘written off’ when it cannot be repaired. Insured Value also factors into claims outcomes, because once the cost to repair the vehicle reaches a certain proportion of the sum insured it will be declared a total loss.

There are two options available: Market or Agreed Value.

Market Value

This is determined by market valuation guides such as Glass’s Guide or Redbook. They take in vehicle sales data from various sources and ultimately represent an average.

This is the preferred setup for insurers, because they only need to make a valuation at the time a vehicle might be deemed a total loss. It is at this point in time where the condition of the vehicle can be determined by an assessor and reductions in valuation can be made. As a result, your premium will usually be a little cheaper should you choose this method.

The flip-side is that you are at the mercy of the valuation guides and the assessor in question, when it comes to determination of your total loss payout.

Agreed Value

As the name suggests, this is where the value of your vehicle is ‘agreed’ at the beginning of your insurance term, guaranteeing a payout amount should the worst happen.

The process differs among insurers. Often it will deploy valuation provided by the guides mentioned above. The same guides also provide an upper and lower limit that is designed to allow for above or below average condition. Most insurers will allow movement within these thresholds.

Some insurers will allow you to go outside these bounds. This can be very meaningful where the vehicle you’re trying to insure is rare, collectible, in excellent condition, or modified.

I always push for the highest value because of the way I care for my vehicles. Replacing it with a like-for-like is going to come at a premium, so it pays to get this right.

Take note that this can work against you in extraordinary circumstances. Covid-19 was a great example, where diminished supply combined with increased appetite to buy saw vehicle values artificially inflate, resulting in agreed values that were below market value.

Repairs

The single biggest lever to profitability for any insurer is in repair costs. Revenue comes in the form of premiums and costs go out to run the business.  The rest gets invested and, most significantly, costs go out to repair or total-loss vehicles.

The repair industry has changed markedly over the years, with massive amalgamation or rationalisation pushed by lower fees from insurers, coupled with increasingly high standards and requirements. Insurers have arrangements with some repairers and economies of scale come from pushing as many repairs through these networks as possible; both for the insurer and the repairer.

I will never take a policy that doesn’t allow me a choice of my own repairer: both mechanical and panel. This helps me ensure the vehicle gets repaired to my standard. Having said that, assessors will scrutinise quotes, looking for anomalies like painting that scratched tailgate following a front-ender.

Ultimately not every panel shop or repairer is the same.

Total Loss

It’s the nightmare scenario, because when you love your vehicle, it breeds attachment. It could be by virtue of the time spent repairing, restoring or maintaining it. It could also be the nostalgia that comes with ownership, or even the lead-up to ownership.

There are policies that will allow you to keep the vehicle if it is deemed a total loss. Some will give it to you at no cost and that’s an option that is more prevalent when a vehicle is older. Others will give you the option to keep it for a negotiated settlement, which will be deducted from your payout. 

This could be particularly handy should you want to bring it back to life (assuming it’s not a statutory total loss), take parts off to put onto another shell, or simply part the vehicle out yourself to recoup more funds than what the payout offers. 

Authenticity

A car is not a conveyance for me, it’s my passion. So, when I speak to someone on the phone about the coil-overs I recently added, it’s meaningful when the person on the other end knows what that means.

This may lead to a higher likelihood that they will understand me at my time of need. Is your insurer at the shows or events you attend? What do their staff do of a weekend? Is it real?

You can’t fake it this stuff, no matter how hard you try, or how many influencers you have pushing your product.

Service

This flows on from Authenticity a little, but is more about the details. Many companies are looking to digitise everything, from quote to policy adjustments and everything in between. It’s about reducing the costs associated with running the business. This is great stuff for an MBA class, but what does that mean for you as a customer?

Do you want to be able to talk to someone on the phone? If so, when will that happen? I’m talking about opening hours here. Does it matter to you if they’re here or overseas? Who owns the business? Is it Australian owned? None of this may matter to you, but if it does, ask the question, don’t assume.

What you don’t want is poor interaction with someone who has no idea what to do when you’re on the side of the road, or worse yet, when it comes to repairs to your pride and joy.

Product

This requires you to read the product disclosure statement (PDS), which is where many switch off. Not all motor insurance products on the Australian market are the same. These days we have products tailored for owner gender, type of vehicle and even the way the vehicle is used.

A lot of this stuff is homogeneous, but you will find some products that have quite unique benefits. The market is made up of a few extremely large businesses and a range of smaller ones, and it pays to look at the latter ,as that’s where you usually find the gold.

Critically, make sure you read your renewal documents! You’ll be surprised how often coverages change and that can provide a rude shock when you’re getting ready to call on your policy at claim time.

Usage

This links to pricing below but is worth calling out separately. Many special vehicles get driven selectively and infrequently. I’ve got a particular vehicle that gets driven once every three months or so and even if I’ve got a planned event, I won’t drive it in the rain. This care should be rewarded.

The frequency of usage is something that many insurance products out there will tailor for. Some will put time or kilometre limits on usage and be quite prescriptive, while others will apply blanket terms. Either way, you can have tailored, low usage policies or even take up a ‘laid up’ option or similar, when the vehicle isn’t being used due to restoration or de-registration. The latter provides coverage for the vehicle when it is parked, but will limit cover when driving under its own power

Price

Everyone’s circumstances will vary, but in my case, this is usually the last thing I look at. At every renewal, I make sure I’m comfortable with the above criteria and only then will I ask for a discount. 

That’s usually facilitated, which is great, but premiums have increased greatly over the last decade. In my personal circumstances I’ve seen a 50-percent increase in my premiums over the last few years – without any claims – and that’s after the small discount that gets applied after I reach out each year.

I wouldn’t put cheap tarps over my vehicles, out of fear of scratching the paint and it’s not that different when it comes to insurance; in my eyes anyway. 

It’s easy to get caught up in the above process, because there is a lot thrown at you to consider. Add a liberal dose of ‘increasing cost of living’ and it could all very easily get put in the ‘too-hard basket’.

Kalthecarguy

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