What is market value?
Insurance cover for classic cars invariably includes the prized
Agreed Value clause, which is one of the main differences between
common or garden motor cover. But there’s always been a lot of
confusion regarding this and what it actually means to the man in
the street, which in turn can cause friction between said man and
the insurers.
Most insurers, however, don’t make their lot any easier by
failing to explain in simple terms what constitutes agreed
value. If they did, it would save many classic car enthusiasts
pulling their hair out when their requested value is rejected and
not knowing why.
A normal motor policy operates on what is called a market value
basis - if the car is a total loss, you will receive the value
at the time of the loss as dictated by the current retail price
usually found in Glass’s Guide.
With classic polices, however, an agreed value is set at the
outset and re-agreed at each renewal. Once it’s agreed, that
will be the value received at any time during the year in the event
of a total loss, with no arguments. Clearly this is good, because
the last thing you want when your car’s lying in a twisted heap is
to have to argue the toss about its value.
The problem lies in the understanding of the definition of
agreed value. Put simply, it’s the market value - the
fair price between a willing buyer and seller on the open market -
but then written in stone at the outset instead of using the value
prevailing at the time of a loss as in a normal policy.
TV antiques programmes though have a lot to answer for here:
“It’s worth £500, but you should insure it for £750”. We see
this all the time; the car bought last week for £3,000 is suddenly
worth £5,000 this week. If asked, everyone says they got a bargain,
but with everyone getting these bargains it’s a wonder we’re not
all trading classic cars for a living…
So, it’s insured for what you paid for it and everyone’s
happy? Not everyone it seems. In those cases where the
insurers can’t agree the client’s idea of their car’s value, the
only way forward is to get a valuation from a specialist. But
of course, not all ‘valuers’ see things the same way. I’ve lost
count of the number of so-called valuations I’ve seen that begin,
“for insurance purposes.” I’ve no idea what this means and
neither have the people I’ve talked to who have written the
things.
I had one from a VW Beetle restorer who opined a client’s mint
early example Karmann Cabriolet was worth, “for insurance
purposes”, the sum of £50,000. When I spoke to him on the
telephone, he admitted it would probably only cost a maximum of
£25,000 to buy a similar car on the open market - assuming one
could be found - but had built in some slack for said “insurance
purposes” and couldn’t explain what this was, even when
pressed. Needless to say it rendered the valuation rather
worthless and we had to do our own research on that one.
The basis of any valuation should be the car’s fair market value
and not the sum total of the rebuild costs, which is another thing
seen often. We recently had a valuation for An Austin Healey
3000 which had the best part of £50k spent on it. Apparently
it started out as a perfectly sound £25k example, so it had stood
the customer in some £75k in all. The ‘valuation’ was furnished by
the restorer and guess what? Yep, “for insurance purposes we
value this car at £75,000.” Of course, a mint Healey 3000 can
be had for £35k, so they were stretching their credibility somewhat
there.
In the end, the valuations insurers rely upon are those given by
a specialist in the marque and containing the phrase: “having
inspected this vehicle, in our opinion the market value is
currently £X.” These show the valuer understands the way the
classic insurance industry operates and they are more likely to be
accepted as proof of a car’s worth by a sceptical insurer.