August 2016

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

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

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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What Affects Jewelry Valuation?

More factors than you might think.

Is it global politics?

The day after Britain voted to leave the European Union, the price of gold spiked to a 2-year high, "fueled by Brexit-spooked investors," as Fortune magazine put it. Experts predict gold prices will continue to climb.

The top graph shows the effect of one dramatic political event, but this 10-year graph gives a picture of gold's volatile history.

 

Is it movie stars?

The emerald earrings and matching ring that Angelina Jolie wore to the 2009 Oscars transformed the emerald market. Emerald dealers reported a surge in sales, even sales of emeralds that were not of high quality. Emeralds became "in."

There's also a huge business in jewelry that mimics pieces worn by celebrities. Online sites offer "designer inspired" CZ jewelry and "original reproductions" at a fraction of the price of jewelry with mined diamonds. The insurer should be aware that words like "designer" and "original" are marketing terms, independent of the actual value of the jewelry.

 

Is it jewelry auctions?

Public auctions can have a strong influence on retail jewelry, as discussed in our June issue. For example, the high premiums for such gems as Burmese rubies and Kashmir sapphires at auction brought a wide appreciation and increased demand for these gems.

 

Is it provenance?

This star sapphire bracelet merits high value because of the quality of the gems and workmanship, but it gains in value because of its history: it belonged to the first kidnap and extortion victims of Machine-Gun Kelly. For jewelry claiming value for provenance, insurers should be sure the piece is properly authenticated and should keep all such papers on file.

 

Is it fashion?

When it comes to antique jewelry, old is not necessarily more valuable. Fashion is an important consideration. A style or setting that was once popular may no longer be considered attractive or desirable. An old stone may not be as well cut as modern methods make possible, or the shape of a stone can go out of fashion.

Even recent purchases can become passing fads and lose their value. The "chunky" ring, with even chunkier stones, was a fad not destined to long survive.

An appraisal valuation is based on the current selling price of the jewelry. If jewelry goes out of fashion and cannot not be sold today, its value may be little more than the gems and scrap metal.

 

Is it where it was purchased?

Location of the purchase may not affect the jewelry's value, but it often affects its valuation.

Tourist sites, internet sites and TV shopping channels often supply valuations far beyond the purchase price. This is why we strongly recommend requiring the insured to have such purchases appraised by a qualified appraiser (GG, FGA+, or equivalent) who is independent of the seller, and to get this appraisal as soon as possible after the purchase. 

 

Is it supply & demand?

If for some reason gem material is in short supply, the price will rise. If the market is flooded, its price will fall. Gem history is full of these ups and downs.

Tiger's eye was highly valued in the late 1800s. Then a large quantity was discovered in South Africa and the price fell to pennies per pound.

In the 1600s amethyst was said to be as valuable as diamond, but then large supplies were discovered in Brazil. Today an amethyst ring can be found on the Internet for $29.95.

In the opposite direction, some period jewelry could not be duplicated today because the best sources have been mined out and the same high quality of gem material simply cannot be found.
 
Or consider the recent history of tanzanite. After a large find, the price was low. Then the main mine flooded, so the price jumped. After 9/11, it was rumored that tanzanite sales were funding Al Qaeda, so the price fell. Then supply shortages again drove the price up. In early 2003, tanzanite rough was selling for $300 a gram (5 carats); by June 2004, it was going for $700 a gram. These days, tanzanite earrings are given away on cruise ships to draw customers to the jewelry counter.

 

Is it technology?

Synthetic (lab-grown) gems are less expensive than mined gems, but their very existence can also lower the price of the mined stone. For example, the Chatham-created emerald can sell at a stable price. Since this is a top-quality synthetic emerald, it has had the effect of holding down the price of natural emeralds. Check with Tom Chatham on this

Similarly, innovative gem treatments can affect the market for untreated gems. Recent technology allows irradiating poor quality drab-colored topaz into a bright blue. The irradiated blue stones are so attractive that the price for natural blue topaz plummeted (while the price of topaz in other colors remained stable).

 

Is it enhancements?

Color and clarity enhancements can really skew valuations—and cheat customers and insurers—if the treatments are not disclosed and the gems are not priced accordingly.

Intensely colored diamonds used to be the preserve of only the very rich. Diamonds in vivid blues, greens, yellows, pinks, even purples, are extremely rare in nature and priced accordingly. Today there are various means for converting off-color diamonds into richly colored gems.  Color-treated gems cost only a fraction of naturally colored diamond, so disclosure of the treatment is crucial to the insurer—and to the insured!
  
Material that formerly would not have been of high enough quality for jewelry can now be clarity enhanced. Fracture-filling is an enhancement in which fractures in the stone are filled with a non-gem material to make the stone look better to the unaided eye (but it does not remove the fracture!). A fracture-filled gem is worth significantly less than a gem of similar appearance that has not been fracture-filled. Again, disclosure is crucial.

 

Is it advertising?

Alas, yes, marketing always plays its part. DeBeers' highly successful slogan "a diamond is forever" is largely responsible for diamond being held is such high regard over other gems. (In earlier times, vividly colored stones, especially red, were far more desirable.)

Other marketing campaigns also have their day. Brown diamond used to be generally shunned as off-color gem material of little value. It was used for polishing diamond. Recent advertising of "chocolate " or "cognac" diamonds has given them a whole new life, with brand names and whole websites devoted to brown diamond jewelry.

 

Is it the brand name?

As with other products, a prestige brand gets to name its price. And so there are many diamonds out there, claiming brand distinction for color, shape, cut, producer, or retailer.  But with gems and jewelry, does the insurer need to replace brand with brand? Typically,  just the functional equivalent is the order of the day.

A recent lawsuit by Tiffany against Costco suggests some room for debate.


Tiffany mounting

Tiffany mounting from Tiffany

The jewelry industry is very competitive and branding diamonds is a marketing move. While tiffany is a well-known name, there are a number of diamond brands that insurers will never have heard of. In the view of most gemologist appraisers, a diamond is valued by its qualities rather than its name. Do some research, or consult a jewelry insurance expert, before replacing a brand-name diamond.

 

Is it the date?

Given all the factors that affect valuation, we can also say that time itself is a factor. An appraisal for diamond jewelry, for example, is an estimation of value for a diamond of this particular cut, clarity, color, size and shape at the time of the appraisal. Similarly, a settlement is based on the jewelry's value at time of loss. That's why an appraisal should always be dated, and appraisal valuations should be regularly updated to be sure premiums are appropriate and a settlement is fair.

 

FOR AGENTS & UNDERWRITERS

The above discussion gives an idea of what an appraiser needs to be aware of in order to arrive at an accurate valuation.

Insurers want an appraisal with a realistic valuation, in order to set proper premiums. But the appraisal also needs to have a detailed description of each component of the piece because values change over time. In the event of a claim, the adjuster can give the description to an appraiser to determine the jewelry's value at time of loss.

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.

Because many factors can affect the valuation of a piece of jewelry, scheduled jewelry should have the appraisal updated every 3 years or so. A current valuation insures that the policyholder pays appropriate premiums and that items are replaceable at the scheduled amount. It also means the carrier may avoid moral hazards associated with inflated valuations, thus eliminating excessive settlements. That said, regular inspections of the jewelry are needed to avoid preventable loss, such as stone loss from a worn or damaged setting.

Some insurers offer standalone jewelry policies with coverage based on annual insurance-to-value calculations on the jewelry, so the client need never get appraisal updates.

FOR ADJUSTERS

If a claim involves brand names or any terms you don't understand, consider consulting a jewelry insurance expert working on your behalf. It could mean big savings.

In the event of a total loss, price a replacement based on the detailed appraisal description, paying close attention to the valuation issues mentioned above.

 

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