February 2004

JEWELRY INSURANCE ISSUES (formerly IM News), provides monthly insight and information for jewelry insurance agents, underwriters and claims adjusters.

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Jewelry Insurance Issues

Table of Contents

Click on article titles in red


What's a Certified Appraiser? - January

Best Appraiser Credentials - February

Are the diamonds you’re insuring real? - March

Handwritten Appraisals - April


Moral Hazard, Documents and the Bottom Line - January

Ruby and Jade - February

How to mail a diamond - March

Jewelry Insurance Appraisal Standards: JISO - April

Describing a gem's color - May

Why not just put jewelry on the Homeowner policy? - June

GIA Diamond Reports - July

Not just a pretty face - August

Moral hazards on the rise - September

Hurricanes, fires, floods—and jewelry insurance - October

Inherent vice / wear-and-tear losses are rising - November

FRAUD UPDATE – lack of disclosure, false inscriptions & doctored docs - December


Inflated appraisals—alive & well! Shady lab reports—alive & well! MORAL HAZARD—ALIVE & WELL! - January

Clarity Enhancements v. Inherent Vice - February

How green is my emerald? - March

Cruise Jewelry - What's the problem? - April

Crown of Light ® - how special is it? - May

Diamonds at Auction — Big gems, big prices, and the trickle-down effect - June

Are you sure her wedding jewelry is covered? - July

What Affects Jewelry Valuation? - August

What to look for – on the jewelry appraisal, on the cert, and on other documents - September

Growing Bigger & Bigger Diamonds - October

Scam season is always NOW - November

Ocean Diamonds - December


Pair & Set Jewelry Claims and the Accidental Tourist - January

Is that brand-name diamond a cut above the others? - February

Vacation Jewelry – Insurer beware! - March

Apple's Smartwatch – The risk of a wrist computer - April

Why you should read that appraisal - May

Smoking Gun! - June

Color-Grading Diamond: the Master Stones - July

Padparadscha—a special term for a special stone - August

Jewelry Appraisal Fees - September

Insuring a Rolex - steps to take, things to consider - October

Diamond camouflage and how to see through it - November

GIA Hacked! - December


Who Grades? - January

Sales, discounts, price reductions, bargains, specials, mark-downs . . . . and valuation - February

Credential Conundrum - March

Frankenwatches - April

Fakes, fakes, and more fakes - May

Marketing Confusion — What is this gem anyway? - June

12 Reasons Not to Insure a Rolex! - July

Why NOT to insure a Rolex: Reasons 5-7 - August

Why NOT to insure a Rolex: Reasons 8-10 - September

Why NOT to insure a Rolex: Reasons 11-12 - October

The Doublet Masquerade - November

Is the gem suitable for the jewelry? Is this a good insurance risk? - December


Wedding Rings on HO? NO! - January

Silver: the new gold - February

Point Protection - March

Tiffany v. Costco - April

What counts in valuing a diamond? - May

Appraising Jewelry - What’s a credential worth? - June

A Cutting Question concerning vintage diamonds - July

Synthesized Diamonds - Scam update - August

Pretty in Pink - Kunzite on parade... - September

Preventing jewelry losses - October

Scratch a diamond and you’ll find . . .??? - November

Synthetics in the Mix - December


Advanced Gem Lab - A deeper look at colored gems - January

Whose Diamond? - February

Appraisal Inflation - It Keeps On Keeping On - March

Big Emerald - April

Changing colors and making gems: Are we seeing "beautiful lies"? - May

Diamonds - Out of Africa. . . or out of a lab? - June

Appraiser's Dream Contest - July

GIA & the Magic of Certificates - August

Pricey when it’s hot: What happens when it’s not? - September

Fooling With Gold - October

Tanzanite – December's stone - November

Branding Diamonds - What do those names mean? - December


Unappraisable Jewelry - January

Replicas - Are they the real thing? - February

Composite Rubies- From bad to worse - March

Jewelry Hallmark - A Well-Kept Secret - April

Non-Disclosure: Following a Trail of Deception - May

Preserving the Diamond Dream - June

Spinel in the Spotlight - July

Jewelry 24/7 - Electronic Shopping - August

Diamond Bubble? - September

Disclosure: HPHT - October

"Hearts & Arrows" Diamonds - November

How a Gem Lab Looks at Diamonds - December


Emeralds - And What They Include - January

Pink Diamonds: From Astronomical to Affordable - February

Palladium-the Other Precious White Metal - March

Bridal Jewelry - April

The Corundum Spectrum - May

How Photos Cut Fraud - and help the insured - June

The Price of Fad - July

Old Cut, New Cut-It's All about Diamonds - August

EightStar Diamonds-Beyond Ideal - September

The Hazard of Fakes - October

Jewelry with a Story - November

Counterfeit Watches - December


Blue Diamond-cool, rare and expensive-sometimes - January

Turning Jewelry into Cash—
Strategy in a Bad Economy
- February

Enhancing the Stone - March

Being Certain about the Cert - April

Every Picture Tells a Story - May

Color-Grading Diamonds - June

The Newest Diamond Substitute - July

What Happens to Stolen Jewelry - August

Jewelry As an Investment - September

Black Diamond: Paradox of a Gem - October

Protect Your Homeowners Market—Keep Jewelry OFF HO Policies! - November

What’s So Great about JISO Appraisal Forms & Standards? - December


Garnet - and Its Many Incarnations - January

Organic Gems - February

Do Your Jewelry Insurance Settlements Make You Look Bad? - March

Don't Be Duped by Fake JISO Appraisal - April

Diamonds in the Rough - May

The Cultured Club - June

Sapphire-Gem Superstar - July

It's a Certified Diamond! 
- But who's saying so?
- August

FTC Decides: Culture Is In! - September

Paraiba Tourmaline – What's in a Name? - October

How Fancy is Brown? - November

CZ – The Great Pretender - December


Moissanite's New Spin - January

Online Jewelry - Buying and Insuring - February

Blood Diamonds - March

Damaged Jewelry, Don't Assume!- April

Chocolate Pearls - May

Appraisal Puff-Up vs Useful Appraisal - June

It's Art, but is it Jewelry?
- July

Diamonds Wear Coats of Many Colors - August

DANGER! eBay Jewelry "Bargains" - September

TV Shopping for Jewelry - October

Enhanced Emerald: clever coverup - November

How do you like your rubies -
leaded or unleaded?
- December


The New Platinum: A Story of Alloys - January

Ruby Ruse - February

How Big are Diamonds Anyway? - March

GIA Diamond Scandal
Has Silver Lining for Insurers
- April

Watch Out for Big-Box Retailers Insurance Appraisals - May

Mixing It Up: Natural and Synthetic Diamonds Together - June

Tanzanite - Warning: Fragile - July

Red Diamonds - August

Inflated Valuations & Questionable Certificates - September

Emeralds - October

Where Do Real Diamonds Come From? - November

Counterfeit Watches - The Mushroom War - December


The Lure of Colored Diamonds - January

Synthetic Colored Diamonds - February

Watches: What to Watch for - March

When is a Pear not a Pair? - April

The Truth About Topaz - May

White Gold: How White is White? - June

One of a Kind - or Not - July

Jewelry in Disguise - August

Valued Contract for Jewelry? Proceed with Caution! - September

Antiques, Replicas and All Their Cousins

Grading the Color of Colored Diamonds

New GIA Cut Grade for Diamonds - December


Synthetic Diamonds - and Insuring Tips - January

Bogus Appraisals and Fraud - February

A Picture is Worth Thousands of Dollars - March

Don't be Duped by Fracture Filling - April

Gem Scams Point to Need for Change - May

What is a Good Appraisal - June

4Cs of Color Gemstones - July

Gem Laser Drilling: The Next Generation - August

Why Update an Appraisal? - September

When to Recommend an Appraisal Update or a Second Appraisal - October

Secrets of Sapphire - November

Will the Real Ruby Please Stand Up - December


Mysterious Orient:
A Tale of Loss
- January

Bogus Diamond Certificates and Appraisals - February

Can Valuations be Trusted? - March

Spotting a Bogus Appraisal or Certificate - April

Counterfeit Diamond Certificates - May

Case of the Mysterious "Rare" Sapphires - June

Politically Correct Diamonds - July

Name Brand Diamonds - September

Princess Cut: Black Sheep of Diamonds - October

Reincarnate as a Diamond - November

Synthetic Diamonds - December


Irradiated Mail/Irradiated Gems - January

Fake Diamonds (Moissonite) - February

GIA Diamond Report - March

AGS and Other Diamond Certificates - April

Colored Stone Certificates - May

Damaged Jewelry: Don't Pay for Nature's Mistakes - June

The Case of the "Self-Healing" Emerald - July

Mysterious Disappearance: Case of the Missing Opals - August

The Discount Mirage - September

What Can You Learn from Salvage? - October

Gaining from Partial Loss - November

Year in Review - December


Colored Diamonds - January

Good as Gold - February

Disclose Gem Treatments - March

FTC Jewelry Guidelines - April

Myths Part I: Each Piece is Unique - May

Myths Part II: Myths, Lies, & Half-Truths - June

New Trend: Old Cut Stones - October

The Appraisal Process - November

Year in Review - December


Deceptive Pricing - January

Gems - Natural or Manmade - February

Jeweler/Appraisal Credentials - March

Fracture Filling - April

Salvage Jewelery - May

Gem Treatments - June

Don't Ask/Don't Tell - A Buying Nightmare - July

Laser Drilling of Diamonds - August

Jeweler Ethics or the Lack Thereof - September

Gem Scam - October

The Truth about Clarity Grading - November

Year in Review - December


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Bogus Appraisals & Fraud

Do valued contracts on jewelry constitute a moral hazard?

Last fall Wal-Mart announced it would begin selling high-end jewelry. Wal-Mart is already the largest jewelry retailer in the country. Other “big-box” retailers such as Costco are also big jewelry sellers. Jewelry, even expensive jewelry, is now mass-marketed.

Increasingly, such sales are accompanied by bogus appraisals; that is, appraisals of questionable value, often from a source of questionable reputation, and containing information of questionable accuracy, completeness, or verification.

A few months ago Wal-Mart’s Price Club Web site advertised several expensive pieces of jewelry, accompanied by appraisals valuing them at far above purchase price. If the gems’ qualities were as stated in the appraisals (and surely the qualities were not deflated), the appraised values were almost double the jewelry’s worth. For example, one particular necklace selling for $300,000 came with an appraisal valuing it at $575,950.

Costco’s Web site and its in-store jewelry cases showed pieces of jewelry accompanied by a GIA certificate and an appraisal valuing the jewelry at well over twice its selling price. GIA (Gemological Institute of America) is a world-respected grading lab which describes/grades gems but does not assign value. Coupling an inflated appraisal with a GIA report lends an air of authority and authenticity to the appraisal that is wholly unmerited.

Costco and Wal-Mart’s Web sites illustrate the widespread use of the inflated appraisal as a sales gimmick. One New York City lab alone provides an estimated 200,000-300,000 bogus appraisals yearly!

Settling claims based on these inflated appraisals means the insurance industry pays and pays — either with lost customer good will when the adjuster offers a reduced settlement or with an overpaid lucrative cash settlement mandated by “valued loss settlements.”

Potential for Fraud

You can be sure that customers are not oblivious to the potential value of an inflated appraisal. Indeed, that’s one of its draws. Not only is the buyer getting a “great bargain,” but regardless of what happens, he “can’t lose.” One insurance specialist called that $300,000 Wal-Mart necklace with the $575,000 appraisal, “a claim in the making.”

JCRS studies of insurers’ claims consistently show a spike in jewelry claims activity at tax time. There’s no explanation for increased jewelry loss at this time of year except that money is needed. It’s also been repeatedly shown that when one makes a bad investment, the easiest way to recoup the loss is through a convenient claim filed against an insurance company.

An Accenture study found that 25% of U.S. adults have no qualms with inflating insurance claims, and that one in ten approve of submitting claims for items that were not lost or damaged at all. Furthermore, half of the respondents in the Accenture survey said that people commit insurance fraud because they can get away with it.

The Problem with Valued Contracts

A number of insurance companies are writing valued contracts on jewelry with a broad-form pair-set clause, agreeing to pay scheduled values for the vast majority of total losses (estimated at over 90% of all jewelry claims).

As more and more jewelry sellers -- especially the national and regional chains, big-box, and Web-based retailers -- offer grossly inflated appraisals, insurers will increasingly be writing policies based on valuations far in excess of the purchase price. A valued contract on such jewelry means the insured could receive a benefit up to TWICE the actual loss sustained.

Under such circumstances, the temptation for policyholder fraud is great. As the court noted in ruling on Ryan vs. Royal Insurance Co. of America in 1990, “to the extent that reimbursement might exceed the value of the loss, policy holders will have the incentive to rid themselves of the insured property.”

It may be time for insurers to consider doing away with valued contracts on jewelry!

Instead of paying the appraised amount on a valued contract, the policy should state that the insurer will repair or replace with like kind and quality, or will pay in money the lesser of 1) actual cash value (ACV), 2) cash equivalent of the company’s cost to repair or replace, or 3) an amount equal to the insured’s interest.

Under a valued contract, the insurer is bound by inflated valuations. Also, policyholders are tempted to profit from false claims. Under an ACV (or replacement cost) contract, however, there is less temptation for fraud and the carrier does what insurance was intended to do: make the insured whole.

The industry may not go broke by over paying inflated jewelry appraisals, but if policyholders see how easy fraud is, they may be tempted to file other bogus claims. The insurance industry needs to actively use insurance industry appraisal standards and sponsor training programs to educate agents, underwriters, and adjusters in spotting clues that suggest inflated valuations and false claims. The best solution is prevention.


Because jewelry appraisals tend to go unchecked by insurers, bogus appraisals and inflated valuations are likely going undetected as well. Insurers should seriously consider writing ACV policies for jewelry, rather than valued contracts, as the best safeguard against overpayment and fraud.

For all quality jewelry, require an appraisal that precisely details the qualities of the piece, such as the ACORD 78/79 Jewelry Appraisal or ACORD 805 Jewelry Sales Receipt. If a claim is made, a jeweler can replace the piece based on the description, rather than just supply something that matches the (possibly inflated) valuation.


Carefully check and compare all documents on file. A simple tool for this purpose is the ACORD 18 Jewelry Evaluation Form. Keep in mind that appraisals supplied by the seller are sales tools that are meant to impress the buyer with appraised valuations that may have no real-world basis. If the appraisal shows a valuation considerably higher than the sales receipt, suspect an inflated valuation.

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