Classic Niche: Local insurer riding wave of classic-car enthusiasm

In 1993, Dan Yogodnik started a business with a friend that leased out exotic cars for special occasions. The biggest hurdle the partners encountered was lining up insurance for the cars.

That experience spurred Yogodnik, who had been working in the banking industry, to start his own insurance firm.

“If we had our own insurance agency, then we wouldn’t have to chase all over the country [for the niche policies],” he said.

What started out as a side business targeting owners of very expensive cars turned into a thriving firm that serves the burgeoning ranks of car collectors who need to insure vehicles they often drive less than 1,000 miles a year.

Castleton-based Classic Auto Insurance Agency Inc. is one of many businesses benefiting from increased interest in classic cars.

Firm statistics on the number of car collectors and what they’re spending are hard to come by. And the clubs for aficionados are fragmented, often bro- ken down by model. The largest overall organization-the Antique Automobile Club of America-has 60,000 members.

“The hobby is growing,” said the club’s executive director, Steve Moskowitz. “From antique cars to street rods, the whole world of collectible cars is in.”

In Indiana, car owners can opt for a special antique car plate if their vehicle is at least 25 years old. The plates are still just a drop in the bucket-less than 1 percent of the total number of plates issued but the number is growing. It jumped 12 percent from 2005 to 2006 and is on pace to set a new record this year, with 7,011 issued by early May.

The growing interest in classic and antique cars has been a boon for Classic Auto, which now has nearly $2 million in annual revenue, employs six people fulltime and two part-time and is looking to expand into policies to cover motorcycles.

In the early years, the firm grew 20 percent to 25 percent per year, but growth has been about half that in recent years.

“We still see growth every single year, but we know the potential is much greater,” Yogodnik said. “The tough thing was having people find us and know we even exist.”

Agents attend car shows and the company advertises in trade magazines to get the word out. The firm has had a Web site all along but has recently put more emphasis on online advertising and added a rate-quote feature to its site.

The target market is classic-car owners who are turned away by traditional insurers that won’t write policies for classic cars. A classic can include anything from a rebuilt muscle car to a Model T.

Traditional insurers often refer customers to specialty firms. For example, Progressive and Geico refer customers to niche insurers like Classic Auto Insurance and its competitors, the largest of which is Traverse City, Mich.-based Hagerty Insurance Agency. Yogodnik recently inked a deal for exclusive referrals by Nationwide Insurance for collector-car policies.

Other traditional insurance firms-such as State Farm and Allstate-write policies for classic cars but often don’t consider the car’s true market value, Yogodnik said. He said traditional insurers often won’t break out of the mold of using age-based depreciation to value a car. But niche insurers go to car shows and auctions and know which models are in demand among classic-car buffs.

Traditional insurers also typically require coverage equivalent to an owner’s primary car, even though collector cars are driven only on occasion. The low mileage and extra care owners devote to their collector cars often pays off in lower rates. For example, a 1969 Camero valued at $15,000 would cost only approximately $130 a year to insure.

“They love them to death and treat them like real family,” Yogodnik said. “You hear the comment all the time: ‘Nobody touches my car but me.'”

The niche policies include some restrictions. Policies come in three mileage cutoffs, limiting the owners to 1,000, 3,000 or 5,000 miles per year. Drivers must be at least 26 years old and have a squeaky clean driving record. Cars must be kept in locked storage.

For the most part, Yogodnik’s clients are 40 years old and up and have the money to indulge in a hobby that’s building steam as baby boomers with disposable income invest in the dream cars of their youth.

And with more exposure, including coverage of classic-car auctions on cable channels, muscle cars are picking up steam.

What’s most interesting to watch, experts said, is the shift in which cars command the highest prices. While Ford’s Model Ts and As fall in value, the cars from the late 1960s and early 1970s, which baby boomers yearned for at the time but couldn’t afford, are rising in value.

For example, a few years ago, you could buy a 1967 Mustang for $35,000 to $50,000, Yogodnik said. Now that same car is fetching around $200,000 at large auctions.

“For a lot of models, prices have quadrupled in the past two years,” he said.

The trend is driving growth for a variety of small businesses, including those that are on the front lines of restoring cars to top condition.

Greenfield-based Vail’s Classic Cars Inc. has been restoring cars for 23 years, but business has been so brisk lately that there’s an 18-month waiting list. Owner Bill Vail said he recently relocated to a shop twice the size of his old one and now employs six people.

“It started as a hobby with my son and me, and it’s really turned into a phenomenal business,” he said.

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