May 2013

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

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

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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What counts in valuing a diamond?

On May 15, a spectacular 101.73-carat diamond sold for the record-setting price of $26.7 million. The gem was called “the most perfect diamond ever offered at auction.”

Where do such prices come from? What makes a diamond “perfect”?  And does this diamond, this sale, have anything to do with the average diamond engagement ring an agent is likely to insure?

Size counts

Of course the size of the diamond counts.  Everyone knows that. The stone that sold for more than $26 million was of remarkable size, but value is not simple math. A 100-carat diamond is worth considerably more than the price of a 1-carat diamond multiplied by 100, because larger stones are very much rarer.

So, for example, according to one current pricing guide, the supplier’s cost for a round brilliant D IF diamond of:

1 carat = $20,000 per carat
3 carat = $90,000 per carat
5 carat = $148,000 per carat ---and so on.

The per-carat price indicates why today’s typical engagement ring hovers around 1 carat. By 3 carats, prices are climbing steeply.

Carat weight is the most talked-about attribute of a diamond, but it’s only one determinant of valuation.

Shape counts

Of the many shapes diamonds are given, round brilliant is by far the most popular. Other shapes have lower prices because, among other things, they are less desirable, less marketable.

For example, two different shapes for a diamond of the same size and quality (a 1-carat D IF diamond):

Round brilliant = $20,000 per carat*
Emerald cut = $11,000 per carat*

Color & Clarity count

In the examples above, “D” represents the color grade of the diamond. D is the highest color grade in GIA’s diamond grading scale, meaning the gem is perfectly colorless, with no hints of yellow or tan. Diamonds of high color grade are more rare, hence more valuable.

“IF” (internally flawless) in the above examples is the clarity grade. (Follow link for an explanation of clarity grades.) Again, rarity is the issue. The fewer flaws, or inclusions, in the diamond, the more it’s worth. The diamond that sold at auction was not only exceptionally large, but it also had the highest color and clarity grades.

Most consumers will choose to compromise on color and clarity in order to get the size diamond they want, usually under 2 carats. Insurance records show that the typical engagement ring sold today has a diamond of color grade G-H and clarity grade VS1-2 (very slightly imperfect). A diamond of these grades with will not appear to be off-color to the untrained eye and its inclusions cannot be seen without a microscope. It’s the desired size and it looks good.

For comparison, a 1-carat round brilliant diamond of:

D color & IF clarity (highest color & clarity) = $20,000 per carat*
G color & VS1 clarity (typical color & clarity choice) = $7,000 per carat*

Cut counts, too!

Cut, the 4th “C” of diamond quality, is crucially important and we have covered that in a previous issue. For a thorough discussion, please see Cut grade for diamonds.

Grade fudging & fraud

Given the importance of color and clarity when it comes to valuation, here’s one more comparison. Suppose this happens:

A 2.5-carat diamond is:

Color grade H & clarity grade VS1 = $12,000*

If its description is inflated by just 1 color grade and 2 clarity grades, its value jumps by a third and it becomes:

Color grade G & clarity grade VVS2 = $16,000*

Many diamonds sold these days come with “certificates” produced by labs that are known to inflate qualities (and hence valuation). As we have often warned, a diamond certificate is only as good as the lab that produces it.

Certificates with inflated qualities and inflated valuations are pervasive in the marketplace and they serve only as sales tools. Both the consumer and the insurer are being victimized. The consumer cannot make a visual judgment but must take the word of the seller and the certificate as to the gem’s qualities. A diamond cert with inflated color and clarity grades also undermines comparison shopping. And ultimately, an insurer who bases a settlement on inflated qualities and valuation winds up overpaying.

For impartial diamond grading, we recommend a diamond report from the Gemological Institute of America (GIA).

Investments, bandwagons & bubbles

Just for the record, it should also be noted that those who purchase unique, collector gems might be buying them for investment purposes. This may or may not be a good idea. It can happen that jewelry from the collection of a famous person, such as Elizabeth Taylor, will sell for stratospheric prices. But a decade later, when the focus of collectors and the public is elsewhere, the jewelry may be worth much less than the buyer paid.

Some experts in the field believe we are experiencing a diamond bubble as far as prices, and that values may well drop dramatically. So, while color, clarity and size will always matter in valuing a diamond, what the exact value will be in the future is unknown. In any case, diamonds of the size and quality most people are buying are not investment material because these gems are less rare. In addition, consumers have no easy market for reselling gems or jewelry—at least not at prices found in the typical retail marketplace.

*All prices listed reflect supplier's cost.

FOR AGENTS & UNDERWRITERS

Be wary of an official-looking lab report (or “gem report” or “diamond description” or “summary of appraisal” or whatever it is called) that carries a valuation. Valuation is not a lab’s business, but an appraiser’s.

Exaggerating color or clarity by even one grade significantly inflates a gem’s valuation, and the larger the stone, the greater the discrepancy. Be sure the gem description comes from a reliable source.

Be especially careful insuring purchases from shopping networks and internet sites, especially eBay.  These sellers rely a lot on hype and rarely disclose all information about the jewelry.

All scheduled jewelry should have an appraisal and a lab report. Ask for a diamond report from GIA, known to be a reliable and impartial lab.

Unless you, the agent, point out the potential for fraud, your client may not see the need to have a new purchase appraised by a disinterested appraiser or examined by a reputable lab. You may save your client from a potential scam.

Preferably, the appraisal should be on JISO 78/79, written by a trained gemologist (GG, FGA+, or equivalent), with 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.

Always ask for a sales receipt. Valuation is based on what the jewelry would sell for in the marketplace, and a sales receipt is the most accurate reflection of that.

FOR ADJUSTERS

Disreputable or non-existent labs can say anything on a certificate and never be called to account. Avoid basing a settlement on a report from a lab you do not know to be reliable.

Compare all available documents—appraisal, lab reports, sales receipt, etc., to be sure descriptions match.

In pricing a replacement, use descriptive information from the certificate or appraisal to get competitive bids. Do not automatically turn to the seller for replacement, especially if it is a large retailer.

 

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