November 2017

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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Inherent vice / wear-and-tear
losses are rising


Have trouble getting your bearings in this picture?
Try enlarging it. The bulbous black spots are the prongs.
An arrow points to a chipped corner.
Press here to see more photos.

Insurers are being set up to pay bogus damage claims. There's a proliferation of damage claims that are actually inherent vice and/or ordinary wear and tear.

Say the insured files a claim. She reports that when she took her ring in to be cleaned, her jeweler told her the diamond was chipped.

It seems to be a simple damage claim. The insurer will probably approve the claim and let the insured's jeweler handle repair or replace. Some insurers will simply write a check. They may even allow the insured to keep the stone rather than taking the salvage.

But wait a minute. Did the jeweler, in effect, just initiate this claim? And did the insurance company, like the insured, merely take the jeweler's word about damage? Do jewelers even know that wear and tear is an excluded peril?

An insurer's standard procedures don't always work.

Let's look at a better approach:

An insurer received a claim for a chipped diamond. The insurer sent the ring to its lab, a lab the company regularly uses for such work, to verify the damage. The photo above gives a view of what the lab gemologist saw, and this is what the lab found:

Gem shapes with
sharp points

Princess cut


Pear cut


Marquise cut

[Note: Some manufacturers chamfer the corners to make them less vulnerable to damage but that is the exception rather than the rule.]

How did this claim make its way to the insurer?

Since the damage was not seen or felt by the wearer, and could be seen only under great magnification, and even then was barely visible except to a gemologist who was looking for it, how was it noticed in the first place? The answer may lie in the state of jewelry retail today.

In 2016 about 1200 jewelry businesses ceased operation. That's 57% more than in the previous year, and most likely the number of closures continues to increase.

A major reason, no doubt, is that the internet is driving sales margins down, way down! Online jewelry retailers make it easier for customers to buy jewelry on their own, without consulting a jeweler. Following the Amazon model, internet sellers can make up with volume what they sacrifice in per-item prices. And brick & mortar stores, many of which have their own internet sites, are competing for this business.

Meanwhile, buyers are increasingly comfortable with e-commerce. It used to be that an outing to the jewelry store was a major, even a glamorous, undertaking. Today consumers can comparison shop and purchase jewelry from their computer or smart phone without leaving home.

Other conditions eat away at jewelers' income.  Lab-grown stones, now more widely available, are lower in price than mined stones, and many consumers are shopping price. Millennials of means are more likely to spend on technology or on experiences, such as travel, than on luxury jewelry. Whatever the reason, jewelry stores are struggling to survive.

With sales and price point declining, one way for a jeweler to increase income and sales is to find a nick or chip in a stone he's cleaned or reset. The jeweler can then encourage the customer to file a claim, with the hope of gaining the repair work and supplying the replacement. The customer trusts her jeweler and files a claim.

Problem #1 is that some of what the jeweler finds is not damage for which the insurer is liable.

For example:

If the insurer gets a photo of the jewelry to be insured, it may look something like this. You'll see only the general look of the piece.

You will not get magnified views, like the one at the top revealing the slightly abraded corner. Maybe a stone about to be insured is already damaged, maybe it is fracture-filled or color-treated or has some inherent vice. You, the insurer, know only what is on the appraisal.
 
Problem #2 happens if the insurer gives the replacement business to the jeweler who found the purported "damage." Chances are the original appraisal valuation was inflated. Chances are the quality of the diamond was also inflated. The jeweler may notice these discrepancies but nevertheless charge the insurer based on the appraisal valuation. The insurer winds up paying inflated costs when there should have been no settlement to begin with.

 

So: What to do when a damage claim comes in?

For all jewelry claims, regardless of value, always have the jewelry examined by your own expert. This means a disinterested gem lab staffed by qualified gemologists, a lab with which you have an ongoing relationship. The lab should report to you not only existing damage but also characteristics of the stone, gem treatments, or any other conditions that would have made the gem vulnerable to that damage.

The lab should also be able to recognize—and report to you—evidence of wear and tear, which is not damage for which the insurer is liable. Photos like the one at the top, along with explanations of the lab's findings, are extremely helpful to the adjuster.

An alternative is to have the stone removed from the setting and sent to GIA for a report on the damage. GIA is widely regarded as the final arbiter in disputes, and a GIA determination avoids the ill-will of a legal battle.

Either of these choices involves some cost, but that should be regarded simply as part of the loss adjustment expense.  These costs will be more than offset by significantly improved loss ratios.

FOR AGENTS & UNDERWRITERS

When taking information for coverage, go about your job as though you are collecting info for a claim. Have that thoroughness in mind, because this is the info the adjuster will need.

Since we know that appraisal valuations are often inflated, ask for the sales receipt (with proof of purchase). If there is a large discrepancy between appraised value and selling price, the price paid is more likely to reflect the jewelry's value.

Appraisal descriptions often inflate gem qualities. The best appraisal includes the JISO 78/79 appraisal form, and is written by a qualified gemologist (GG, FGA+, or equivalent) 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.

Ask the insured for any lab reports. Some labs are known to be unreliable, and some labs are completely bogus; a report from GIA is the most highly regarded. Insureds tend to be very cooperative when taking out insurance, so it is worth the effort to collect necessary documents and multiple pictures of the jewelry (top, side, bottom views) at this time.

FOR ADJUSTERS

Always have damaged jewelry examined by your own expert. Use a gem lab staffed by qualified gemologists who understand the kind of information insurers need.  It should be a lab with which you have an ongoing relationship.

Normal wear and tear and inherent vice may look like "damage." Be sure the lab understands distinction that are crucial for insurers.

The lab should report to you not only existing damage but also characteristics of the stone, gem treatments, or any other conditions that would have made the gem vulnerable to that damage. The lab's report should include photos of any damage, with notations.

If you cannot locate a suitable lab, you can submit a diamond to the GIA for a report on damage. The cost of using a lab should be regarded simply as part of the loss adjustment expense and will significantly improve loss ratios.

Have the claim department or the adjuster send the jewelry, along with its documentation, to the lab as soon as the claim comes in. Once you have the lab's report, then involve the adjuster.

Use an adjuster who is well trained and experienced in dealing with jewelry. Caution: "Fixed liability" claims are deceiving. Jewelry losses are not for newbies.

It can be useful to ascertain whether damage was noticed after a ring was left with a jeweler for resizing or for resetting a stone. The stone may have been damaged in resetting, and there have been cases of stones being substituted while in a jeweler's care.

 

 

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