Year In Review
The year-end holidays bring the usual seasonal influx of scheduled jewelry. With the increased business, agents and insurers should be especially aware of ways to make their work easier and give policyholders the best service possible. This issue briefly summarizes IM NEWS stories and advice from the past year, as a reminder of some of the issues and solutions.
Inflated Valuations
Many jewelry retailers artificially inflate prices so they can offer their customers "discounts." Then they write an appraisal with the inflated price as the valuation.
TIP: Be sure the appraisal includes detailed descriptive information. (Use ACORD 18, Jewelry Underwriting and Claim Evaluation, to check that you have the necessary details.) This descriptive information, rather than the valuation, is what you will give the replacement jeweler in the event of loss or in determining insurance to value (ITV).
See January IM NEWS.
Synthetic Gems
High quality diamonds and other popular stones are now synthesized in labs and sold by jewelers. These are optically and chemically identical to their natural counterparts but have a much lower value—sometimes as little as 1% that of the natural gem.
TIP: Many appraisals will simply not mention that a stone is synthetic—a potentially costly omission for the insurer if a synthetic stone is replaced with a natural gem. The appraiser who uses the ACORD 78/79 appraisal form guarantees that synthetic gems will be explicitly identified.
See February IM NEWS.
Jeweler/Appraiser Credentials
Literally anyone can hang out a shingle as a jeweler or appraiser. The retailer selling jewelry and writing appraisals may have no gemological training at all. In one study by JCRS, only 21% of insurance appraisals were prepared by graduate gemologists.
TIP: Recommend that policyholders obtain appraisals on the ACORD 78/79 form. This appraisal must be prepared by a Certified Insurance Appraiser™, who is a Graduate Gemologist and who has examined the jewelry with proper gem lab equipment to determine its value.
See March IM NEWS.
Fracture Filling of Gems
Surface-breaking cavities or internal fractures in gemstones are often filled with a foreign substance to improve the gem's appearance and fetch a higher price. The treatment is cheap and easy, using fillers that range from proprietary formulas to 3-in-1 oil. Fracture filling should always be disclosed on the appraisal.
TIP: The breakdown of a fracture filling treatment is not damage for which the insurer is liable. It is wise to suspect fracture filling if the damage is noticed just after the jewelry has been cleaned or the stone reset. In settling a claim on damaged stones, have the stones examined in an independent gem lab by a Certified Insurance Appraiser™.
See April IM NEWS.
Salvage Jewelry
Perhaps your company paid out money on a piece that was lost, only to have it turn up a few weeks later. Maybe a policyholder's jewelry was damaged, you ordered a replacement and took possession of the damaged piece. Even damaged jewelry can still have value.
TIP: The best way to deal with salvage is by competitive bids. Call the jewelers you deal with and ask if they want to bid on your salvage. Don't accept the first offer you hear—compare offers.
See May IM NEWS.
Gem Treatments/Enhancements
Some gem treatments are done to deliberately camouflage a gem's weakness. The Yehuda clarity treatment, for example, makes a diamond of lesser value appear (to the naked eye) to be of much higher quality. All such enhancements should be disclosed on the appraisal; if a claim is made on a lost gem, a treated stone has a significantly lower valuation than an untreated stone.
TIP: Information about treatments can come only after inspection in a gem lab by a trained professional, such as a Certified Insurance Appraiser™. A jeweler without the proper equipment or training may leave out treatments because he has not detected them. Recommend that policyholders get appraisals on the ACORD 78/79 form, where the trained gemologist appraiser warrants that gem treatments are explicitly stated, unless they are part of the normal handling of that gem.
See June IM NEWS.
What Jewelers Don't Tell
Most jewelry appraisals lack crucial information. They leave out the 4 Cs of diamonds—Color, Clarity, Cut and even something so basic as Carat weight. They leave out hue, tone and saturation of colored stones. They neglect to mention gem treatments, which lower the value of the stone compared to an untreated gem. These omissions occur because the appraiser is not a competent gemologist or is deliberately concealing information in order to inflate prices. Neglecting to include important information on the appraisal cheats both the consumer and the insurer.
TIP: If the appraisal you receive is obviously inadequate, insist on one that is more complete. Recommend that the policyholder get an appraisal on ACORD 78/79 by a Certified Insurance Appraiser™, a gemologist trained in appraising for insurance. Explain to the policyholder how a detailed appraisal is to her benefit: it is a record of what exactly she owns and, in the event of damage or loss, it assures that her replacement will match the quality of the original.
See July IM NEWS.
Laser Drilling of Diamonds
An inclusion in a gem reflects light differently and shows up as an imperfection. Sometimes gem dealers drill microscopic channels into an included stone, then use an acid to bleach the foreign material and make it less visible (to the unaided eye). Laser drilling is very evident under a microscope, but not all retailers have the lab equipment and training necessary to detect it. Also, not all retailers believe it is necessary to disclose this treatment.
TIP: Laser drilling is always done to conceal a flaw. A drilled stone is worth less than an undrilled gem with the same appearance, so this treatment should always be disclosed on the appraisal. A CIA™ using an ACORD 78/79 appraisal warrants that all such treatments are disclosed. A laser-drilled diamond can be replaced with a laser-drilled diamond. Similarly, if you are replacing an undrilled gem, require the jeweler to guarantee that the replacement has not been laser drilled.
See August IM NEWS.
A Diploma Is Not a Credential
The Gemological Institute of America now offers training for jewelers leading to an AJP diploma — Accredited Jewelry Professional. As stated in the GIA's own advertising, this course is designed to help sales associates improve their retail knowledge and sales presentation.
TIP: If you see AJP after an appraiser's name, remember that this diploma represents salesmanship. It does not imply gemological or appraisal training.
See August IM NEWS.
Jeweler Ethics
No professional jewelers' organization has established a code of ethics for its members. Unethical jewelers can cheat the buyer—and the insurer—by overstating valuation, leaving off crucial information from the appraisal, not disclosing gem treatments or flaws, and by writing appraisals without properly examining the stones. Most appraisals contain a statement declaring that the appraiser cannot be held responsible for the contents of the appraisal. This is, in effect, a license to say anything on the appraisal and not be held accountable.
TIP: An ACORD 78/79 appraisal guarantees that all necessary exams were performed in a gem lab, warrants that the valuation reflects the current replacement price at the jeweler's store, and identifies the insurer as first party to the appraisal. This means the insurer has direct recourse against the appraiser if the appraisal has errors or omissions.
See September IM NEWS.
Gem Scams
In one telemarketing scam, the gems arrived by mail and were sealed in plastic "to retain value." Due to the seal, an independent appraiser could not properly examine the gems to corroborate the stated valuation. In a recent headline case, a jeweler in West Palm Beach defrauded wealthy customers out of millions of dollars by selling them flawed and fake stones he claimed were from a sultan's estate. The con artist told his customers that showing the gems to another jeweler — as for an appraisal — would leak the news that the estate was being sold and prices would be driven up. In both situations, the buyers simply took the sellers' word that the gems were of high value and they were getting a bargain.
TIP: A detailed descriptive appraisal by a trained professional, such as a Certified Insurance Appraiser™, records the qualities from which the jewelry's valuation is derived. It assures the customer, and the insurer, that the jewelry is as the seller claimed.
See the September and October IM NEWS.
Fictitious Clarity Grading
Some gem suppliers are grading diamonds as "SI3"—a grade that does not exist in the grading system adopted by the Gemological Institute of America (GIA) and recognized internationally. Suppliers do this in order to pass off lower quality I1 (Imperfect) grade stones as "Slightly Imperfect."
TIP: If you are settling a claim based on an appraisal for a "SI3" diamond, use the grade I1 when describing it to a jeweler for replacement. The SI3 grade does not exist in the GIA system.
See November IM News.
©2000, JCRS Inland Marine Solutions, Inc. All Rights Reserved. www.jcrs.com
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