Shifting into gear: Solid demand and rebounding investment income will drive revenue.
London, United Kingdom (PRWEB) August 02, 2013
The Classic Car Insurance industry generates revenue from two main sources: premium income and investment income. However, premium income accounts for the bulk of revenue and is estimated to account for 82.8% of industry revenue in 2013-14. There are many different types of classic car insurance policies, including comprehensive cover, laid-up cover, and third party, fire and theft cover. The level of risk and the premium prices vary considerably, depending on the type of policy.
The industry has faced challenging conditions over the past five years. Consumers' confidence and real disposable income declined sharply at the start of the period and remained weak for the rest of the five-year period. According to IBISWorld industry analyst Iyman Uvais, “These factors caused premium income and demand for classic cars to drop because some owners were forced to sell their classic cars and cancel their insurance policies due to financial distress.” Investors purchasing classic cars for investment purposes also began to dispose of them in search of safer assets. These factors caused demand for classic car insurance policies to fall. Similarly, investment income plummeted at the start of the period when financial markets tumbled and has remained highly volatile ever since. Industry revenue is estimated to contract at a compound annual rate of 0.2% over the five years through 2013-14. During the current year, revenue is forecast to rise by 1.7% to £574.5 million as improving consumer confidence and real disposable income growth raise demand for classic cars and insurance for them. Higher investment income is also expected to support growth during the year.
Over the next five years through 2018-19, the industry is projected to grow more steadily. Uvais adds, “Improving economic conditions are expected to help consumer confidence rally and allow real disposable incomes to rise which in turn should stimulate demand for classic cars.” Demand for classic cars is also likely to receive a boost from investors becoming more aware of the lucrative returns such assets can generate. These factors will push up demand for classic car insurance policies over the coming period. Meanwhile, investment income is forecast to rise and support overall revenue growth.
The Classic Car Insurance industry has a moderate level of market share concentration. The largest four industry operators are estimated to account for 44.7% of industry revenue. The biggest players use their extensive knowledge of motoring insurance and the power of their brand name to dominate the industry. These companies have a relatively secure financial position and can invest more heavily in classic car insurance. Nevertheless, there is significant competition in the industry, particularly on price, because the internet has provided consumers with easy access to price-comparison tools. The major companies include Aviva, Direct Line Group and Liverpool Victoria.
For more information on the Classic Car Insurance industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
Industry participants underwrite (i.e. assumes the risk for and assign premiums to) classic car insurance policies. According to HMRC, any car that is over 15 years old and has a market value of at least £15,000 is a classic car, but insurers can vary in their definition. The level of risk assumed and the cost of an insurance premium vary according to the type of insurance policy being underwritten.
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