October 2014

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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Why NOT to insure a Rolex – Reasons 11-12

Say the insured just bought his Rolex from an authorized Rolex dealer, and he has all the warrantee papers and a sales receipt. Clear sailing! You've got everything you need to write it up.

But what if the watch wasn't from an authorized Rolex dealer? …Or the insured doesn't have (or "can't find") the sales receipt or warrantee papers? … Or the watch isn't brand new? You may have a sharp-looking appraisal in hand, but can you trust the description and the valuation?

(The numbering below continues from our previous issues—Reasons 1-4, 5-7, and 8-10—on why not to insure a Rolex.)

 

11. Most appraisal valuations on new Rolexes are inflated.

An appraisal for a new Rolex from an authorized Rolex dealer will generally give the valuation as the Manufacturer's Suggested Retail Price (MSRP). This is a concern for insurers. Most authorized Rolex dealers will discount the purchase as much as 20% off the suggested retail price. That means the MSRP as a valuation is excessive.

The sales receipt is a truer indication of value.

If the watch comes from a dealer in gray goods, the price discount will likely be even steeper. "Gray goods" refers to merchandise that is not purchased from an authorized dealer in the brand. For example, an authorized Rolex dealer may go out of business and sell his stock to another retailer (who is not an authorized Rolex dealer) at a good discount. Or an importer may buy the product in a country where it sells for a lower price than in the U.S., so he can offer customers a reduced price and still make a profit.

Unlike the black market, such gray market dealings are perfectly legal. The merchandise may be a new, never-worn Rolex, but there was no oversight of the chain of transactions. The customer may actually be getting a fake Rolex or a watch with counterfeit parts. As we discussed in previous issues (see links at top of page), the market in counterfeit Rolexes is immense, immensely profitable, and worldwide.

Rolex regards grey-market watches as second-hand because they did not come from an authorized Rolex dealer. As second-hand goods, gray market purchases should not be valued at the Manufacturer's Suggested Retail Price.

Again, the sales receipt attests to the watch's retail value.
 

12. For vintage Rolexes, valuations are often grossly inflated.

 "Vintage" is a term for used watches—it's like "pre-owned" for houses, or "estate" for jewelry. Vintage doesn't connote quality; it just means the watch isn't new.

Here's the problem

Insurers often receive appraisals for old Rolexes with valuations that match the MSRP of the current model. Such outrageous valuations are common practice but they should not be accepted.

A luxury watch is a quality machine but watch parts, such as mechanisms and bracelets, wear out. Also, the company may make improvements from year to year. The improvements may be so subtle they are not visually apparent.

With the exception of rare collector pieces, watches begin losing value as soon as they walk out the door, just as cars decline in value the minute they drive off the lot. Remember that, like a car, jewelry is insured for actual cash value (ACV). A 20-year-old Rolex President should not be replaced with this year's model, any more than a car would be.

Yet such a replacement is exactly what Rolex promotes. An authorized dealer appraising an old Rolex would give it a valuation equal to the MSRP of the current model. And so would many independent appraisers.

Down-side for appraisers: Appraisers who give an old Rolex the same valuation as the current model expose themselves to E&O subrogation claims.
 
Down-side for insurers: Moral hazard! An insured who realizes that his old Rolex will be replaced with a new one may to decide to "lose" the old one. It is the insurer's responsibility to avoid situations that create moral hazard.

UP-SIDE for Rolex: 1. When an old Rolex has a valuation equal to that of the current model, the customer feels he has an item that holds value, or even appreciates in value.  2. In case of a loss, the insurer may unknowingly take the inflated valuation as true, resulting in the purchase of a new Rolex. Although there is a huge market in used Rolexes, Rolex doesn't benefit from the sale of used watches, only new ones.

 

Vintage Rolex Market

One online dealer described the vintage luxury watch market as "overwhelming and bursting at the seams."  Rolex is a star here. Some Internet retailers take watches on consignment, others buy outright.

Some sites list both "buy" and "sell" prices, and the inventory changes daily. These sites are thriving because customers are more likely to buy another watch if they can easily sell the one(s) they have. And retailers of used watches don't even mind if people buy new watches from Rolex dealers, since they're confident those same watches will wind up on their site eventually.

With vintage Rolexes, as with so much online shopping, it's buyer beware. Descriptions are spare, details may be inaccurate and valuations can run amuck.

This Rolex President was selling online for $10,500, while its estimated retail value was given as $24,495.

An insurer needs to know exactly what is being insured. Should an underwriter accept this Valuation Report?

So what we have here is:

Valuation:       $24,495
Selling Price:  $10,500
Realistic value (based on available information): $6,000-7,000

If the underwriter simply accepted this Valuation Report as valid:

13. This is a bonus (making a baker's dozen): Few jewelers will take the risk of opening a watch to properly examine it; they would be taking on a major liability, which their insurance will probably not cover.

Appraising a Rolex requires taking the watch apart to identify and record all its parts. The appraiser must be able to recognize whether each part is authentic or counterfeit. He must also be familiar with earlier models of the brand and must know their value in the vintage market.

A responsible jewelry appraiser who lacks this very specific competence should build a relationship with a certified Rolex watchmaker, who can perform such a thorough examination.

Aim of this series on Why NOT to Insure a Rolex

The purpose of this 4-part series is to build awareness of a problem. Some insurers are not even aware of the high loss ratio for men's Rolexes, the prevalence of counterfeit Rolexes, and the grossly inflated valuations, and how all this affects their bottom line. Some companies are aware of adverse loss ratios with Rolexes and have chosen to set a limit of $10,000. Some companies insure Rolexes only as collateral to the account.

When insurance companies make too-generous settlements too often, they may decide to get out of the market. If this happens, agents will have no market for insuring Rolexes.

Agents and underwriters should be proactive in requiring detailed appraisals with realistic valuations.

 

FOR AGENTS & UNDERWRITERS

Ask for the sales receipt.

An appraisal valuation should be the price that the jewelry retails for. If the stated valuation is considerably higher than the selling price for a recent purchase, the sales receipt is your best guide to the watch's value.

It is common for appraisers to value a used ("vintage") Rolex as though it were the current year's model. Such a valuation is grossly inflated. It creates moral hazard, and agents and underwriters are advised not to accept it. There are tools available that give pricing for vintage Rolexes, and a competent appraiser should be aware of them.

Agents and underwriters are advised not to accept it. There are tools available that give pricing for vintage Rolexes, and a competent appraiser should be aware of them.

Only an appraiser familiar with the Rolex brand, and how it sells in the marketplace, can properly appraise a Rolex. Recommend that your clients get an appraisal from 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. If the CIA is unable to perform a proper inspection and determine valuation, he can recommend an expert.

It may be necessary to send a Rolex to an authorized dealer, or to the company itself, for an appraisal. This may seem pricey to the insured, but it should be considered part of the price of owning a quality watch. An appraisal from Rolex verifies that the watch is genuine Rolex in all its parts.

Things to keep in mind:

 

FOR ADJUSTERS

Claims on Rolexes can be expensive. To guard against fraud:

If you suspect a watch is counterfeit, consider consulting a jewelry insurance expert to help resolve the issue.

For an authentic Rolex, seek a replacement only from an authorized dealer for that brand. Do not be tempted to shop in the huge market that exists for watches with unauthorized aftermarket add-ons unless you are satisfied that the insured watch contained aftermarket add-ons.

 

 

 

 

 

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