Big Passion, Big Payday

Nikki Brown is fanatical about emerging modern art and atypical jewelry. She is a fixture at auction houses Christie’s and Sotheby’s, and attends all the important gallery openings, museum exhibitions and global art fairs, from Miami’s Art Basel to Maastricht’s TEFAF. She is building a small collection of emerging modern art and jewelry pieces by Gianmaria Buccellati. In college at the University of Georgia, her favorite classes were in fi ne art. She majored, however, in risk management. Today, Brown is a broker specializing in the insurance and risk management needs of a very affluent clientele. She has found that the best way to build her book of business is to delight in her customers’ ownership of fine art. “It makes it more personal when you have shared passions,” says Brown, regional director and global fine art practice leader at Aon Private Risk Management, a boutique division of the large brokerage. “This is much more than just insurance. It’s about a personal connection through something they love.”

Other agents and brokers serving the unique insurance needs of the wealthy also have learned that the key to cultivating relationships is to nurture an interest in the things of beauty and value that they prize. Eric Gordon, for example, knows more about collectible cars than he ever imagined he would. “We just had a client here whose Mercedes 300SL with the gullwing doors was backed into a tree and sustained significant damage,” says Gordon, vice president and one of three owners of Denver Agency Company, a Denver-based independent agency. “The original estimate for fixing it was $35,000, but because this was a rare and unique vehicle requiring a very specific paint job, the ultimate price tag was $146,000. I learned a lot about just how valuable these vehicles can be.”

Collections Ride Out Recession

Rare cars, fine art and jewelry, and even comic books and baseball cards are rising in value faster than the stock market.

Valuable collections didn’t suffer much in the recent recession. This past February, Sotheby’s auctioned a life-size bronze sculpture by Swiss artist Albert Giacometti that sold for more than $104 million, a record for any art work sold at auction. Record prices for vintage automobiles are similarly being recorded. In May 2009, Sotheby’s auctioned a 1957 Ferrari 250 TR chassis with pontoon fenders at the annual Ferrari Leggende e Passione in Maranello, Italy. One of only 22 such cars manufactured, it sold for a record-breaking $12.2 million.

The same story holds true with other valuable collectibles. In February, a rare 1938 Action Comics No. 1, marking the debut of Superman, sold for a record $1 million. A month later, that record was eclipsed by the sale of Detective Comics No. 27 from 1939, the first to feature Batman, for $1.07 million. The battle between the two comic superheroes wasn’t over, though. Another edition of Action Comics No. 1 fetched a record $1.5 million at auction, shattering the previous records. And so it goes.

Rare Passions, Rare Risks

These various interests require a different stripe of insurance beyond the typical treatment applied to cars, jewelry and art. Not only are the values stratospheric, the risks are singular. In the case of vintage autos, owners often take them for 1,000-mile spins at rallies like the Mille Miglia, the Colorado Grand and the California Mille. Some also race their cars despite the multi-million dollar values, although the activity is not covered by insurance.

Nevertheless, accidents always happen, as the owner of the Mercedes gull-wing learned when the vintage car’s hydraulic brakes failed. When car parts need replacing, automotive specialists and not the local body shop must attend to the job, often fabricating the needed parts by hand. Rare cars also suffer from unique loss conditions like mold attaching to decades-old fabric and leather.

Such specialized risks require specialized insurance. Three insurers—Chubb, Ace and Chartis—own most of the high net worth insurance market, with a handful of others picking up the slack. Each of the insurers has a separate division or unit focused on insuring their private clients.

Like the agents and brokers who serve this clientele, carrier executives also have honed their knowledge about the valuable items. “I have a job requirement that tells me I need to market insurance for collector cars, and it has fueled a passion in me for the vehicles,” says Jim Fiske, U.S. marketing manager at Chubb Personal Insurance. “I now have this fantastic, built-in excuse to spend a disproportionate amount of my time looking at car magazines.”

Fiske can rattle off a list of favorite vintage cars down to their unique characteristics, like fin tails and toothy bumpers. He’s attended most of the major rallies like the Mille Miglia, which dates back to 1927. Although the event today is a gentleman’s rally, the original endurance race was hotly contested. “In 1957, the race was banned following a deadly crash, and did not resume until 1977,” Fiske explains. “It is limited to vintage racecars built between 1927 and 1957.”

Obviously, one cannot drive a vintage car from Beverly Hills to Milan. “Owners participating in the Mille Miglia, and other rallies like the 1,000 Millas Sport Argentina in the foothills of the Andes, typically transport their cars there by airplane,” Fiske notes. “It’s the safest way to travel, given the jostling in vans along highways and on the high seas. It’s expensive, of course, but if you can afford a $5 million car you’re not going to skimp on the transportation.”

Cracking the High-End Market

Independent agents and brokers still reeling from the twin effects of the recession and the soft commercial lines insurance market should consider serving a more affluent clientele, carriers say. In many cases, upwardly rising individuals may still have their insurance policies bound by captive writers. “There are a lot of high net worth individuals who are still with the same mass market providers they were with when they started their careers, and have now outgrown them,” says Hourihan.

Developing an interest in the things that induce passion in these individuals can be the entry point for writing the insurance— and then some. “If someone owns and loves vintage cars, the way to insure their homes will be through the garage,” Hourihan says. “Or if it’s fine wine they love, the way in will be through the wine cellar.”

Courtemanche from ACE notes that the collector car market is growing each day in the number of collectors and rare cars. “More cars become classic each year that passes by,” he explains. “Someone might have a car that was worth a few thousand dollars 10 or 20 years ago that is suddenly worth 10 times as much, at present. Yet, it sits there in the garage with a regular insurance policy covering it. An agent who understands the import and value of such a vehicle has an opening to begin a conversation.”

Other ways of nurturing an interest in vintage cars is to join one of the many collector car clubs dotting the country, advises car aficionado Fiske. “There is a club for Mercedes gull-wing owners that is meeting in Philadelphia’s Simeon Museum in May,” he says. “Even though I don’t own a gull-wing, I’ve been invited by the club members to come by and have some fun. I can’t wait.”

Fiske counsels agents to connect with affluent individuals about what is important to them, as opposed to just talking about insurance and risk. “You want to do this in a personal and engaging way, highlighting the depth of understanding you have about their particular affinity, whether it’s cars or comic books,” he says.

Jim Schwarzkopf, a partner in the Maumee, Ohio-based independent agency The DELP Company, does just that. “We were handling the estate planning and succession planning needs of high net worth clients when we recognized an opportunity to provide specialized insurance on collector cars,” he says. “One of our clients is Craig Jackson, whose family sponsors and runs the big collector car auction house Barrett-Jackson, which is considered the Super Bowl of vintage automobile auctions. We insured Craig’s cars with Chartis, which led to Chartis signing an agreement with Barrett-Jackson to offer a specialized car collector insurance program. We’re insuring more and more collector cars by the week.” He adds, “Most agents see personal lines as an afterthought to a commercial account, but we have now made it a focus.”

So has Brown, albeit her passion is fine art. “I was visiting with a client in Paris at an art fair recently, when he mentioned that he had written a book on Greek art,” she says. “I read the book, even though Greek art wasn’t a particular obsession, and came away enlightened. When he called me recently, I mentioned how much I had learned from his book. Previously, we hadn’t been all that communicative. The next day, he and his wife invited me to join them at another art fair.”

As for her own collection, she is constantly on the prowl for rare pieces of jewelry. “I’m a Buccellati girl—for me it’s all about craftsmanship and design,” Brown explains. “There might be some diamonds and filigree work, but this isn’t the point for me. I like unusual pieces best. The just make my eyes water.”

What’s it Worth?

Valuing rare vehicles, jewelry, antique furniture and fine art is a difficult exercise, given market fluctuations of late. Consequently, these works typically are scheduled in the insurance policy with a stated agreed value, as opposed to being insured under customary contents coverage. “Affluent clients don’t want to be battling with insurers about the value of a vintage car or work of fine art after a loss,” explains Bob Courtemanche, CEO of Ace Private Risk Services. “We also schedule some items on a blanket basis, such as a valuable baseball card collection. If there are hundreds of cards worth roughly the same price, it would be exhaustive to itemize each one. But, if one card is worth several hundred thousand dollars, we would schedule it separately.”

Eric Gordon, vice president and one of three owners of Denver Agency Company, a Denver-based independent agency, says what separates the insurers from others in the marketplace is their willingness to pay claims in excess of a costly item’s current market value. “We’ve had clients who have lost a $100,000 piece of jewelry that costs $150,000 to replace, without the insurer balking at the additional expense,” he says. “Not that they aren’t experts in the market value of the stuff they’re insuring. They really understand what’s going on with collector cars, fine art, yachts and so on. As do I, more and more.”

Gordon knows what he’s saying—he was the agent for the client filing the claim on a Mercedes 300SL. Chubb paid the claim, even though it was nearly five times more than originally appraised, due to the need to repaint the entire automobile and not just the damaged rear end. Once fully restored, the automobile, which is valued at around $800,000, made an auspicious debut at the Amelia Island Concours d’Elegance, winning second place in its category and a special award for elegance.

—R.B.

Beyond the Policy

Sometimes serving an affluent clientele goes beyond the obvious. An affluent vintage car collector insured by Chartis had stored a rare car on a ship bound for Italy and the Mille Miglia when the engine of the ship broke down and it was denied entry by a nearby port. “Anyone with property on the ship was assessed a penalty that had to be paid before the ship would be allowed to dock,” explains Jerry Hourihan, senior vice president of Chartis Private Client Group. “We paid it on behalf of the client so he could make it to the rally on time.”

—R.B.