March 2012

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

2017

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

2016

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

2015

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

2014

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

2013

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

2012

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

2011

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

2010

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

2009

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

2008

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

2007

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

2006

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

2005

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
October

Grading the Color of Colored Diamonds
November

New GIA Cut Grade for Diamonds - December

2004

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

2003

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

2002

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

2001

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

2000

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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Appraisal Inflation —
     
It Keeps On Keeping On

An insurer receives an application on a black diamond engagement ring. The appraisal values the ring at $9,250. The sales receipt says the buyer paid $2,999. Suspicious? Yes.

Here are some questions the insurer asked, and where the answers led.

Who wrote the appraisal?

The submitted appraisal came from ABCG, American Board of Certified Gemologists.

The name sounds official but . . . it’s just a name. The gemologists are not certified by anyone.

Who’s the seller?

In this case, it’s an online retailer, Liori Diamonds. It has its own website as well as a strong eBay presence. In both places, similar rings were selling for under $3000.

So where did the $9,250 valuation come from?

Good question. It came from the seller’s desire to show the customer a document that “proves” the jewelry is a bargain, and the appraiser’s willingness to provide an inflated appraisal.  A valuation more than 3 times the regular selling price is grossly inflated.

What about gem enhancements, or treatments?

The appraisal does not mention treatments — it does not specify whether the stone is treated or untreated. But on Yelp, the retailer has a promotion for the clarity enhanced diamonds it sells: “When you purchase a clarity enhanced stone [you are] purchasing the look of a VS stone for an SI price.” That is, the stone looks better than it is.

The page on the Liori site carries the statement that the diamonds are natural and have not been treated or enhanced. We would like to see this statement on the appraisal. In fact, we’d like to see it on an independent appraisal not supplied by the seller.

Website text can be changed at any time. To the buyer, and to the insurer, it is the documents in hand that matter.

An enhanced stone is worth significantly less than an untreated stone of similar appearance (to the aided eye). So the insurer wondered whether the diamond on the jewelry in question was a treated, with a valuation of an untreated stone.

What’s the ring really worth?

When there is a huge difference between the appraised valuation and the purchase price, the selling price is a better indicator of true retail value. Valuation should be based on what the jewelry would sell for, and the purchase price is exactly that.

What are the appraiser’s credentials?

The ABCG website says all its appraisers are GIA Graduate Gemologists, and the document carries an illegible signature with GG behind it. We have no way of checking whether they’re GGs, but we have our doubts because . . .

What about the quality of the gems?

GIA has developed language for describing diamonds, terminology that is widely used and understood around the world. Although the ABCG graders are said to be GIA Graduate Gemologists, the grading on this document does not follow GIA standards.
 
On this certificate, “Round Brilliant” is used to describe cut and shape. But Round Brilliant is a term that designates only for the shape of the diamond. A diamond’s cut (one of the 4Cs, along with color, clarity and carat weight) is a set of proportions. Putting cut and shape together is just a way to obscure the fact that cut proportions are not being given at all.

Clarity is graded as “AAA (Ideal),” but this is a phony, feel-good phrase. GIA has no such grade. Its scale of grades goes from IF (internally flawless) to I3 (included 3). And “Ideal” describes the proportioning of a stone, not its clarity.

The color of the stone is said to be “Fancy Black,” but GIA has no such designation for color grade.

Such bogus grades tell us nothing. Unless the appraisal uses standardized grading terminology, the descriptions are useless in determining value.

The document is called a “Certificate & Appraisal.” What’s the significance of that double name?

This lab is taking advantage of the prestige associated with the term “diamond certificate.” The document looks official, and its layout mimics the look of a diamond certificate from a respected diamond grading lab.

However, a certificate from a respected lab, such as GIA, only describes (or “grades”) the stone. It is not involved in sales, and does not assign value to the stone or to the jewelry as a whole. Its grading certificates can be trusted because the lab has a reputation for accuracy and impartiality.

It’s true that anything can be called a certificate, but in this case the issuing lab is riding on the popularity of jewelry “certificates” of all kinds being perceived as authoritative testimonies of value. ABCG has no status as a diamond grading authority.

This document is just an appraisal. A poor one, at that, with an inflated valuation.

What does “the fine print” say?

Here’s how ABCG stands behind its appraisals:

The American Board of Certified Gemologists is not to be held liable for any discrepancy on the grade or appraisal results of any diamond or gemstone. Should you seek a different opinion, it is your responsibility to accept any quality or monetary differences between the reports. Should you find that the diamond or gemstone you received is not in accordance with the issued report; ABCG is not to be held liable.

(from the ABCG website)

Who’s being scammed?

Even though the appraisal may be misleading, if the consumer is happy with the purchase, and if he got what he paid for, what’s the problem? Here are a few of the problems:

How prevalent are grossly inflated appraisals?

VERY!  This is not at all an unusual case. Especially for jewelry purchased on the internet, documents distributed by jewelry sellers are often canned appraisals and certificates from bogus labs, and they are not to be trusted.

ABCG’s site says: “Our Expert diamond gem analysis is recognized by all major insurance companies.” What this means is that insurance companies accept these inflated appraisals, as they do most appraisals, at face value. Insurers are not experts; they are fooled, just as consumers are.

Why hasn’t the prevalence of inflated jewelry appraisals been reported in the jewelry industry press??? Why haven’t we seen exposés on national television?

Perhaps because the problem is so commonplace.

So what did the insurer do, when presented with this inflated appraisal?

The company insured the ring at the purchase price. The insurer did not want to rain on the buyer’s parade by telling him he didn’t get a bargain. But sooner or later someone will tell him the true value of the piece.

Note: This article was prompted by a real-world insurance application, but it would be unethical to reveal private information received from a policyholder. As it happens, jewelry appraisal inflation is so common that we were able to find many, many examples on the Internet. This is only one.  

FOR AGENTS & UNDERWRITERS

There’s nothing so convincing to consumers as a piece of paper that says: What you are buying is really valuable! Because they serve as sales tools, to impress consumers, appraisals and certificates supplied by the seller are likely to be inflated.

Ask for the sales receipt for recently purchased jewelry. If there’s a huge difference between appraised value and purchase price, the purchase price is a more accurate indicator of value.

If there is a large discrepancy between the sale price and appraised value, urge the policyholder to get an appraisal on JISO 78/79, the insurance industry’s standard.

Recommend that your clients get an appraisal from an independent appraiser as soon as possible after the purchase, to verify that the quality and value of the jewelry are as stated by the seller. The appraiser should be a trained gemologist (GG, FGA, or equivalent), preferably one who has additional insurance appraisal training. One course offering such additional training is the Certified Insurance Appraiser™ (CIA) course of the Jewelry Insurance Appraisal Institute, Oakland, CA.

Don’t be taken in by a document just because it’s called a certificate and looks impressive. Diamond certificates are only as trustworthy as the labs that produce them.

For diamond certificates, trust only a reliable lab, such as GIA, AGS and GCAL. Follow these links to verify reports you receive:

GIA Report Check
AGS Report Verification
GCAL Certificate Search

FOR ADJUSTERS

Compare the appraised value with the sales slip, if available. Jewelers are required to hold sales receipts for at least three years, so if the insured doesn’t have the receipt, contact the jeweler.

If there is a large discrepancy between valuation and selling price, the selling price is a truer indication of value.

If a claim is made for damage, always have the damaged jewelry examined in a gem lab by a trained gemologist (GG, FGA, or equivalent), preferably one who has additional insurance appraisal training. One course offering such additional training is the Certified Insurance Appraiser™ (CIA) course of the Jewelry Insurance Appraisal Institute, Oakland, CA.

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