Diamonds are forever

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With insurance claims for jewellery on the increase, the industry has grown impatient and complacent when it comes to getting an item valued. Norman Bick says insurers need to keep a closer eye on their clients' valuables

Over the past decade, due to the rapid increase in jewellery insurance claims, the jewellery repair sector has become one of the leading markets in the industry, dealing with a substantial amount of business every year. Unfortunately, due to this growth in claims, the insurance industry is increasingly neglecting this vital part of the process in favour of cash settlements and are, consequently, not always paying the correct amount.

When dealing with the loss of a diamond engagement ring, a damaged watch or any high-value jewellery claim, the right questions need to be asked in order to establish any reasonably correct replacement figure. Before a realistic claim figure can be obtained where a diamond is lost from a platinum engagement solitaire ring, for example, the qualities of the lost diamond need to be established along with the repair costs.

The cut (stone proportions), colour (whiteness of stone), carat (size) and clarity (purity) are all important ingredients when valuing the diamond. If none of the above specifications are known, the amount originally paid along with the date of purchase will give some indication of the stone qualities. However, this forces the repairer to rely on the assumption that the original valuation for the item was correct.

Once the value of the stone is established and a suitable replacement sourced, the ring itself needs to be assessed to establish what restoration work must be completed for it to be returned to a useable state. This is normally where the replacement costs can be inflated and exaggerated. The estimate needs to be assessed by a professional and experienced jeweller, otherwise not only will the ring be in danger of being overvalued but also these fraudulent values will be presented to the insurance company, leading to leakage and extra money being spent.

It is, however, possible to eradicate inflated and incorrect values within jewellery repair claims. Once a claim has been submitted, a proof of purchase, such as a receipt or pre-loss valuation (preferably within the past five years), should be requested. This standard procedure should be enforced by the insurance industry to insure fraudulent claims are kept to a minimum.

The item then needs to be examined by a jeweller in order to establish repair costs, including any stones that need to be replaced. It also needs to be examined for wear and tear, which is currently not covered on most general insurance policies.

The next stage in the process is crucial. Once the estimates have been submitted, an impartial and unbiased validation company - not a high-street jeweller as their loyalties lie with the claimant - must examine them in order to ascertain whether the values are correct. When the item has been fully repaired, a new valuation should then be submitted to the insurance company.

On target

One of the major issues in the jewellery industry is that insurance claims handlers are settling claims as quickly as possible to meet high targets. This means that any discount received from a high-street jeweller or replacement company is seen as a bonus and is, therefore, not necessarily examined in any detail.

A 10% saving is frequently too good to be true. For example, the estimate, which the discount has been taken from, might be twice the price it should be. An estimate for repair might show a figure of £1500, offering a 10% discount but what needs to be understood is that the estimate for replacement is often overpriced. In this case, the correct price would save the insurance company hundreds of pounds instead of the £150 initially quoted.

When a property insurer is dealing with a roof repair to a residential property, an expert in that field will be called upon to inspect the damage caused and estimate how much the repair will cost. Once the correct process has been completed, an expert in that field will then carry out the repair work.

Car comparison

Another example would be if a car has been damaged. An assessor will be contacted in order to inspect the damage and calculate the repair work needed to make it roadworthy and drivable. Once again, the quotation should have been agreed with all parties and a specialist repairer should carry out the repairs.

However, when dealing with a jewellery repair claim, the claims process undertaken seems to differ and values are often agreed without an expert's intervention. Even with this knowledge the insurance industry constantly uses validation companies that have no prior experience with jewellery, which begs the question: how can a company validate jewellery claims if it does not have day-to-day knowledge of the costs involved?

If the process was more stringent and the estimates were checked consistently, over-exaggerated and inflated estimates would not go unnoticed and the overall figure paid out to claimants would decrease dramatically.

The insurance industry must reassess its processes for replacing jewellery. If insurance claims personnel used their own money to settle these claims would they be as quick to use cash settlements on overstated values or would they be more vigilant in obtaining the correct values?

Norman Bick is claims director of the Jewellery Replacement Company.

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