Lab-Grown Diamonds – now and into the future
How popular are lab-grown diamonds?
☐ Very
☐ Increasingly
Why should insurers care?
☐ Moral Hazard
☐ Settlement overpayment
☐ Pricing fluctuations
ALL answers above are correct!
Just a few years ago |
Today and tomorrow |
Are LGD (lab-grown diamonds) "real" diamond? The jury was out. |
Emphatically, yes, diamonds grown in a lab and diamonds mined from the earth are both real diamond. Even the FTC says so. |
GIA wouldn't grade lab-made diamonds. |
GIA and other grading labs provide grading reports that specify whether a diamond is mined or lab-grown. |
Would LGDs catch on with jewelry purchasers? |
LGD sales are increasing even faster than industry experts expected. |
Many jewelers chose not to carry lab-grown diamonds. |
More jewelers offer both mined and lab-grown diamonds. Some jewelry brands have a separate line for their lab-grown jewelry. |
De Beers' Lightbox advertised its lab-made diamonds as suitable for "light" occasions like birthdays, but held that only mined diamonds were appropriate for serious life events like weddings. |
So quickly have lab-grown diamonds become the choice for wedding jewelry that even Lightbox now competes in the bridal jewelry market. Industry predictions are that half of all engagement diamonds will be LGD by 2024. |
LGDs were slightly below mined diamonds in price. |
LGD prices are now significantly below mined diamond — a startling 85% below, according to one estimate. |
It's difficult to distinguish mined diamond from lab-grown, so LGD can be passed and priced as mined diamond. |
Grading labs like GIA can afford special equipment that recognizes LGD. Most jewelers and appraisers do not have such equipment or training. |
Lab-grown diamond's effect on mined jewelry sales? Not much. |
An analysis in February 2023 found that 46.6% of diamonds sold in the U.S. were lab-grown. The attractively low price of LGDs resulted in lower prices on mined diamond jewelry, in order to be more competitive. Consequently, prices of both continue to be in flux. |
The relevance of all this for insurers? Disclosure!
☑ Moral hazard
Though mined and lab-grown diamond are both diamond, chemically and optically the same, lab-grown is lower priced. That's just how the market is. If an insured discovers that they paid a mined-diamond price for a lower-valued LGD, they could be tempted to have a "convenient loss." Be sure to have a reliable document, such as a GIA lab report, stating that the diamond is either mined or lab-grown.
☑ Settlement overpayment
A lab-grown diamond might carry the much higher valuation of a mined diamond. Perhaps the purchaser of the jewelry was defrauded by the seller. Perhaps the appraiser did not recognize the stone as lab-grown. Unless documents specifically state that the diamond was mined, the insurer could overpay a claim.
☑ Pricing fluctuations
Since settlements are based on value at time of loss, keep in mind that today's valuation may not be accurate in a year or five. The growing popularity of lab-made diamonds, along with increased production, makes for a competitive pricing environment. Progressively lower LGD prices are also disrupting the pricing of mined diamonds. For all diamond jewelry, whether the diamond is mined or lab-grown, it's wise to keep valuations up to date.
Considering the ongoing drop in prices, it may be possible for more jewelry to be covered by the Homeowners policy. It's also possible that more consumers will decide to self-insure.
FOR AGENTS & UNDERWRITERS
Lab-made, man-made, laboratory-grown, created, cultured and synthetic are some terms describing real (not imitation) diamond made in a lab.
For insurers, the distinction between mined and lab-grown diamond is crucial because of the valuation difference.
Don't assume a diamond is mined just because the appraisal doesn't say it's lab-grown. The appraisal should specifically state whether the stone is mined or lab-made. Be sure to read all the fine print on the appraisal.
It's always best to ask for the sales receipt, which will likely reflect the value of the jewelry. A large discrepancy between purchase price and valuation may indicate a lab-made diamond with mined-diamond valuation; or it may point to an inflated valuation on a "feel good" appraisal used as a selling tool.
As production of lab-grown diamonds increases, their price will go down. To be competitive, mined diamond prices may also decline. On the other hand, since the supply of diamonds from the earth is limited, values of mined diamonds may go up. The situation highlights the importance of keeping valuations up to date. This goes for policies already in place as well as for new coverage.
A diamond of one carat or more may have a grading report from a reliable lab. We recommend the following labs, and you can use these links to verify reports you receive. The lab reports distinctly state whether the diamond is mined or lab-made.
GIA Report Check
AGS Report Verification
GCAL Certificate Search
The best appraisal includes the JISO 78/79 appraisal form and is written by a qualified 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.
FOR ADJUSTERS
Lab-made, man-made, laboratory-grown, created, cultured and synthetic are terms describing real (not imitation) diamond made in a lab.
Mined diamond has a substantially higher valuation than lab-made diamond. If the appraisal or lab report does not explicitly state whether the gem is mined or lab-grown, use every means possible to determine which it is. If possible, interview the seller!
Deliberate non-disclosure is always possible.
Be especially diligent with colored diamonds, which are very expensive for mined diamond but easily produced in the lab. For example, Lightbox (owned by De Beers), sells its pink and blue diamonds at the same price as its colorless diamonds.
Sales receipts and proof-of-payment docs are often helpful in establishing whether a diamond is mined or lab-made. Read the fine print!
Take note of brand names on the docs, as some names may indicate producers or retailers of lab-made stones.
On a damage claim, ALWAYS have the jewelry examined in a gem lab that has reasonable equipment for the job and is operated by a trained gemologist (GG, FGA+ or equivalent), preferably one who has additional insurance appraisal training, such as a Certified Insurance Appraiser™.
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