Hobbies provide people with an escape during tough times. Companies that provide an infrastructure that helps them enjoy those pursuits can also foster engagement that allows them to sell goods and services.
For example, over the past few years, Hagerty has built an ecosystem that includes not only its automotive enthusiast-oriented specialty insurance but also a club, live events, digital media and marketplaces – all devoted to collectible vehicles and the enthusiasts who own them.
These are designed to help automotive enthusiasts of all sorts enjoy the hobby, Hagerty CEO McKeel Hagerty said Monday (May 9) during the company’s quarterly earnings call.
“But they also allow Hagerty to gain a larger share of consumer discretionary spend and to create a sense of community and belonging among car lovers,” he added, “which is important, because the larger this community grows, the more discretionary income car people spend within our ecosystem. ”
Providing a Safe Haven During Economic Downturns
In a presentation released in conjunction with the earnings call, the company reported that as of March 31 it had recorded year-over-year growth of 9% in paid member count in its Hagerty Drivers Club, 11% in total active members, 16% in written premiums and 30% in total revenue.
“As we have seen in past economic downturns, the enthusiast vehicle universe tends to be safe to have where people spend available discretionary funds and their free time,” Hagerty said.
To reinforce its presence in that universe, during the first quarter, the company acquired two more car event brands, signed a partnership that will place its cars in a popular motorsports video game, expanded its marketplace for buying and selling collectible cars, acquired a collector car software provider, launched an insurance-cost saving Mileage Verification App and “reimagined” its enthusiast carsharing platform and its collector car valuation app.
Seeing Both Headwinds and Tailwinds from Inflation
The car hobby and insurance industry have proven to be resilient during economic downturns, Hagerty said, noting that during his 20 or so years as CEO of the company, he has seen the dot-com crash, the economic crisis, several catastrophic weather events and the pandemic.
“What I can say, in general, is this: Our business model is incredibly resilient in economic downturns, both from a growth and a profitability standpoint,” Hagerty said.
Speaking of current inflation, Hagerty said it provides both headwinds and tailwinds. On the one hand, it increases wage pressures, transportation costs and other expenses. But inflation also increases the value of vehicles, which in turn allows insurers to increase premiums for both new and renewing customers.
“In 2021, we saw almost 70% of the 40,000 makes and models of vehicles that we track in our valuation tools went up in value nearly 10%,” Hagerty said.
Monetizing the Addressable Market
Hagerty said the collector car ecosystem faces the same global uncertainty as any other industry, with inflationary pressures and higher interest rates and supply chain issues impacting vehicle transportation, roadside assistance, and repair.
Hagerty said the company would remain focused on controlling what it can control and managing the business through different economic cycles, adding that the company expects to see continued double-digit growth in written premiums.
“We will continue to provide our members with a wealth of new offers that will attract and retain car lovers,” Hagerty said in a press release, “which enables us to further monetize our sustainable addressable market as our members expand their use of fee- based Hagerty products and services. ”