Year in Review
This issue summarizes IM NEWS stories and advice of the past year, to help insurers and agents make their work easier and give policyholders the best service possible.
Color-Enhanced Diamonds
Intensely colored diamonds are extremely rare in nature and have therefore been very expensive and considered collector's items. Technicians are now able to turn cheap brownish and yellowish diamonds into attractive, richly colored gems. The danger is that the enhanced diamonds may be passed off as natural, and the stated value can be many times—even hundreds of times—the gem's real worth.
TIP: Every colored diamond of significant value you insure should have a Diamond Certificate from the Gemological Institute of America, as well as an appraisal. If a color treatment is detectable, it will be disclosed on the diamond certificate.
See January IM News
Laws Governing Gold Jewelry
U.S. law requires that any jewelry labeled "gold" must also be stamped with the karatage, such as 18K. Karatage refers to the gold's purity, that is, the proportion of gold to alloy. Pure gold is 24 karats; 18 karat gold means the piece is at least 18/24 gold. Jewelry stamped as karat gold jewelry must, by law, also bear the manufacturer's hallmark or trademark. This presence of the trademark shows that the manufacturer stands behind the karatage claim.
TIP: Stamping jewelry with karatage and manufacturer's trademark is a great selling point. Buyers and insurers should be suspicious of jewelry described as "gold" that is not stamped with karatage.
See February IM News
What Determines Value in Gold Jewelry
Karatage refers to the proportion of gold to alloy. Workmanship—described with terms such as cast, die-struck, machine-made, and handmade—indicates important differences in quality. The overall weight of the piece is the final factor.
TIP: An appraisal of gold jewelry should include karatage, manufacturer's name, style number of the piece, workmanship, and weight.
See February IM News
New FTC Ruling on Gem Treatments
The FTC ruled this year that jewelers and manufacturers must disclose any gem treatment that "significantly affects the value of gemstones." One such treatment is laser drilling, done to conceal flaws in a lower quality stone.
TIP: Any treatments that affect value should be disclosed on the appraisal (not just verbally to the buyer). Neglecting to mention such treatments cheats the consumer and, if a claim is made, cheats the insurer. An ACORD 78/79 appraisal assures the insurer that all treatments affecting value are noted.
See March IM News
The FTC & Its Jewelry Guidelines
The Federal Trade Commission works to eliminate practices that are unfair or deceptive or that threaten consumers' opportunities to exercise informed choice. The FTC's Jewelry Guides, which have existed in some form since 1918, are not law but they are highly regarded by the jewelry industry as a standard for ethical merchandising. Regarding these most recent changes, the Commission concluded that technology changes so quickly, it would be pointless to name all the treatments that should be disclosed. The guiding principle is not to mislead the consumer.
TIP: If a submitted appraisal does not mention whether or not the gem is treated, and if the valuation is significant, require the appraiser to assure in writing that the gem is untreated. You might take this opportunity to discuss with the policyholder the FTC's role in protecting consumers, and the importance the FTC attaches to disclosure of gem treatments.
See April IM News.
Gold Prices Falling
In February gold reached its lowest price in 20 years, falling to $257 an ounce from its all-time high of $850 an ounce in 1980.
TIP: Perform insurance-to-value (ITV) calculations on a regular basis to avoid inflated valuations.
See March IM News.
Each Piece is Not Unique
The vast majority of jewelry sold comes from outlets like Zales and Macy's, and a certain percentage of these are involved in losses. These are not unique handcrafted items, but mass-produced work that can be described by manufacturer and style number. Even independent jewelers purchase merchandise from suppliers' catalogs. Retailers do not like to disclose manufacturer and style number because that would dispel the image of the jewelry's uniqueness and would also allow the customer to comparison shop.
TIP: When a claim is made, knowing the manufacturer and style number allows the adjuster to comparison shop for a replacement. Insist that this information be on the appraisal whenever possible.
See May IM News.
List Price vs. Valuation
Many retailers set artificially high "list prices" so they can offer discounts and sales. This deceptive practice is so widespread that one judge thought it unfair to punish the single violator on trial "in an industry that appears dominated by many violators." Let the buyer, and the insurer, beware.
TIP: The list price alone should never be the basis for scheduling jewelry, since you have no way of knowing whether the price is inflated. Scheduling jewelry should be based on an appraisal containing complete descriptive information, in enough detail that a jeweler can use it to determine the quality and price of the jewelry described and the insurer can perform ITV calculations. The ACORD 78/79 jewelry appraisal lays out this information in an easy-to-read format.
See June IM News.
Jewelry Replacement Services
Some replacement services claim to have lower prices because they are located in large cities where competition is greater. Some replacement services offer special discounts to insurers. Remember that replacement services can play the same game with insurers that jewelry retailers play with customers: make claims, inflate prices, and offer "discounts."
TIP: Shop around. Get competitive bids on replacements, then decide which service to use.
See June IM News.
New Trend: Old Cut Stones
Dealers in estate diamonds are seeing a proliferation of reproductions of old-cut diamonds, appealing to the taste for antique jewelry. The reproductions may then be passed off as antique and touted as valuable.
TIP: Jewelry is not necessarily valuable because it is old. Styles go in and out of fashion, quality and workmanship vary, and old jewelry may be worth no more than its scrap value. When you are insuring old jewelry, it is important that the appraising jeweler be a Certified Insurance Appraiser™ who is knowledgeable about antique and estate jewelry.
See October IM News.
The Appraisal Process
Of course a jewelry appraisal needs a valuation, but it should be the current selling price, not some imaginary "list price." The appraisal should contain a detailed description, that will be useful to the adjuster in pricing a replacement. And it should be prepared by a graduate gemologist who is also a Certified Insurance Appraiser™ in jewelry.
TIP: ACORD, the nonprofit organization that develops standards for the insurance industry, has incorporated the above standards into its form 78/79, Jewelry Insurance Appraisal.
See November IM News
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