Classic cars & boats: A potentially lucrative target market

Rough Notes, Jan 1999 by Zinkewicz, Phil

Collectors may insure multiple units... but cross-selling represents even greater opportunities

At this year's 103rd annual Independent Insurance Agents of America (IIAA) Convention and Trade Show in Boston, Fred Eppinger, director and partner with the consulting firm of McKinsey & Co., sang a positive song to independent agents who, in today's insurance environment, often feel frustrated by drastic changes taking place at an ever-increasing pace. On first hearing, that song may seem a little old hat-perhaps, albeit in insurance terms, sounding a bit like the old "June, Moon, Spoon, Tune" theme heard so many times before.

Eppinger said that agents must "understand their target markets, recruit and maintain aggressive new talent, and build a strong customer franchise," lyrics too often sung by other insurance executives and consultants sans the marvelous sincerity of a Frank Sinatra. On second hearing, however, the song's message struck a note that, although familiar, is worth keeping in mind: Independent agents still have an advantage over other marketing systems in that they deal directly with the customer. Eppinger, quite rightly, said that "consumers want independent, cost-effective advice," and that a recent McKinsey & Co. study showed that 30% of customers with "good agents" would not switch carriers or agents for any discount.

That positive assessment by customers in the McKinsey survey, taken in conjunction with Eppinger's admonition that agents must understand their target markets, begs the question: What does "understanding" your target market mean?

CNA has come up with a new product involving antique cars and classic wooden boats, a product specifically geared for independent agents to sell, which might put a new twist on the traditional view of target marketing. According to the product's designers, the line of business being "targeted" will not in and of itself provide agents with serious new income. But, they say, agents can use this coverage as a means of opening the door to cross-sell other more traditional and more lucrative insurance products-in other words, using a product to target potential new customers.

The new line being offered by CNA is antique car and classic wooden boats insurance to be marketed through the program administrator, Hagerty Classic Insurance Agency which operates out of Traverse City, Michigan. CNA describes the Hagerty agency as one of the "fastest growing and largest national agency program managers specializing in this rapidly growing specialty market segment." CNA said that, through this agreement, it will expand this new product line to its current agents.

Ernest A. Lausier, president of CNA Personal Insurance unit, said that CNA is tapping Hagerty's marketing, underwriting and claims-handling expertise in servicing classic automobile and classic boat policyholders, and that the program is designed to fit the "unique" coverage needs of collectible automobiles and boats. The program, he said, is also priced lower than other specialty and standard carriers' programs.

"We have identified the classic automobile and boat market as an area of opportunity for us and our agency partners," said Lausier. "Hagerty Classic Insurance Agency will help us gain market leadership in this rapidly growing area. Hagerty exemplifies the kind of responsive customer service capability that we are working to achieve in all areas of our business."

McKeel Hagerty, president of the agency, is the architect of the new program being offered by CNA, and his interest in providing insurance for collectors of antiques and boats comes naturally. The Hagerty family are themselves collectors of classic autos and boats. His expertise in insurance is also understandable. His parents, Frank and Louise, began a general insurance agency in 1956. "My dad ran the insurance end and my mom ran the business operations," he says.

Hagerty's agency does nothing but provide insurance for collectors, and he boasts more than 100,000 customers. "More coming in every day," he says. One of his customers, he says, owns 2,007 classic autos, "so you can multiply those 100,000 customers by the number of cars they own. According to Hagerty, the market is a burgeoning one and one ripe for agents to target. "The people who own these vehicles and boats are obviously affluent and, if an agent can get a foot in the door by showing he or she has the initiative to handle this special need, clearly there are opportunities for other sales."

Many insurance companies shun the business, however, because of the potential for loss, given the large amounts of money that go into restoring and keeping these vehicles. Hagerty believes they are wrong.

"We know that classic car and boat owners are the safest, most conscientious drivers and boaters who own the most pampered, cared-for vehicles and boats," he says. "Our program with CNA allows us to reward these customers with the most comprehensive insurance coverage at perhaps the lowest rates in the business."