A diamond’s valuation depends on its 4Cs—cut, color, clarity and carat weight. The question is: Who grades the diamond? Who says the diamond is of this or that clarity grade, this or that color grade?
Whose word are you trusting?
And how important is this when it comes to settling a claim?
Many retailers supply certificates, or lab reports, with the jewelry they sell. The lab report states the specific qualities of the gem in the jewelry, and the retailer offers it in order to substantiate what he is telling the customer.
Ideally the certificate comes from a disinterested authority. Both words are important. An authority must be a recognized expert in examining and grading gemstones. To be disinterested, the authority must have no stake in the outcome of the exam.
In previous newsletters we’ve discussed the growing problem of unreliable labs, labs that have a reputation for pushing their grades up a notch or two. Exaggerated grades may impress the jewelry buyer, but these labs are not respected authorities.
There’s now a trend that challenges the concept of disinterested: jewelry retailers that have their own certifying labs, turning out lab reports on the jewelry they sell.
This is not completely new. Tiffany has had its own lab for years, and it works to the company’s advantage because Tiffany is a name far more recognized by the average consumer than is GIA (Gemological Institute of America), a reputable lab not engaged in selling gems.
Forevermark, part of the De Beers group of companies, has had its own grading lab since 2008. Diamonds graded in the lab are inscribed Forevermark and sold as brand-name diamond, supported by a Forevermark lab report.
Recently Forevermark hooked up with AGS (American Gem Society) Labs. AGS has been a respected independent lab, providing reports to jewelry manufacturers and retailers, as well as to consumers. AGS now grades under the Forevermark label. Forevermark’s U.S. president Charles Stanley stated, “So we have created a private label service within AGS. They are effectively another Forevermark lab.”
A company having its own lab verify the quality of a gem it sells is not quite like having an independent, disinterested opinion. It’s more like having the seller confirm his own opinion. It remains to be seen whether AGS, considered to be a reliable lab, will be able to maintain its independence when grading Forevermark diamonds.
Not only big name jewelry manufacturers have their own labs. Smaller retailers are also moving in that direction, supplying their own lab reports for the jewelry they sell.
Some jewelry store labs grade gems according to the GIA grading system. Others invent their own descriptions. One retailer gives his staff “Value Notes,” sort of talking points for describing the jewelry. Rather than educating customers on existing terminology and grading standards, this jeweler says: "We use terms such as face-up whiter, or a 90-point spread as big as a carat." Rather than describing gems in terms of the recognized 4 Cs, the store is working on “changing the way our customers talk about diamonds.”
This approach is undermining the whole point of an objective standard in describing gems for the purpose of valuation. Such casual language makes it impossible for customers to comparison shop. It would also be impossible for an adjuster to properly price a replacement for a “face-up whiter” diamond.
Jewelers give various reasons for issuing their own diamond reports. They say existing labs are undependable because a stone can receive different grades from different labs; they know their store’s own grades are true.
They argue that it’s the jeweler who is ultimately responsible for what he sells, so a report from another lab doesn’t much matter. They claim that customers don’t care about reports, or don’t care where the report comes from.
Without a doubt some grading labs are unreliable, exaggerating qualities to make gems sound more valuable. Such labs may supply retailers with reports that include valuations far beyond the selling price. Among gemologists, it’s no secret which labs those are.
There are also bogus labs, labs with names that have no reputation, sometimes no address or website, labs whose names are never seen in print except on the masthead of a document that purports to verify the quality of a purchase.
Rather than exposing these dodgy or completely bogus labs, or simply avoiding the use of their reports, some jewelers have decided to produce their own reports. In the worst cases, instead of striving for the most accurate gem description, they merely produce the most salable description.
Because some labs have more “flexible” grading standards than others, the same diamond can receive different grades from different labs. For example, a stone given a color grade of H by one lab could be graded a notch or two higher by another lab.
This can lead to problems at claim time:
If the stone’s original lab report had inflated grading, and you replace the stone with a diamond of that quality as graded by a more accurate lab, the insured would actually be getting a better stone than she started off with (and the insurer would be paying a higher price for the better stone).
Or suppose the reverse happened. Suppose the stone’s original lab report gave accurate grades, but you replaced it with a diamond that came with an inflated report from a less scrupulous lab. In this case, the insured would be getting a poorer quality stone than she had. She might not realize it at the time. But later—perhaps the stone is damaged or is reappraised—an appraiser will accurately grade the stone, revealing it to be of lower quality than she originally had. The insured will hold the insurance company responsible. She won’t know or understand about the grading discrepancies among labs. She’ll blame the insurer for cheating her by supplying a cheap replacement. This may well cause her to remove all her business with the insurer.
To escape this dilemma, have the replacement house supply a stone that has a grading report by the same lab that wrote the original diamond report. That is, if the claim you’re working has a GIA report, ask the replacement house for a GIA-certified stone with the qualities specified on the original GIA report; if the stone has an EGL report, ask for an EGL-certified stone with the qualities specified on the original EGL report, etc.
This protects the insurance company from ill will down the road, and ensures that the insured will get a stone of like kind and quality (LKQ).
FOR AGENTS & UNDERWRITERS
Don’t take at face value just any document that calls itself a diamond report. Consider the source. Any certificate you accept may be the basis for a future settlement, so you want to be sure the certificate is reliable.
We recommend the following reputable labs and suggest that you use these links to verify reports you receive.
Be wary of a diamond report if:
- It comes from a lab other than one of the reliable labs noted above.
- It is supplied by the retailer.
- It carries a valuation. (Reliable grading labs do not assign value.)
- The valuation on the report is significantly higher than the selling price.
Even a good lab report is not a substitute for an appraisal. The lab report describes only the stone; an appraisal describes the jewelry as a whole, including metal type, karatage, weight, trademark, etc.
Preferably, the appraisal should be on JISO 78/79 form, 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.
If you have a report from one of the reliable labs, hopefully it was authenticated and you can trust it.
If there is only a report from a lab not listed above, compare the report’s description with the description on the appraisal. Compare the valuation with the purchase price, if available.
When a large settlement is at issue, and you have reason to suspect the truth of the appraisal or gem report, it could be worthwhile to consult a jewelry insurance professional to help determine the true quality and value of the jewelry and avoid a large overpayment.
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