Politically Correct Diamonds
“Authentic Canadian diamonds” vs. “blood diamonds.”
Is this distinction important to the insurer?
A growing undercurrent in the jewelry industry is the issue of "blood diamonds" or "conflict diamonds." In certain war-torn areas of Africa, armed groups have taken over the mining and distribution of rough diamonds. They use the proceeds to finance military activities and commit grave human rights abuses. The World Diamond Council as well as several governments and the United Nations are working to curb this illegal trafficking, without jeopardizing the legal diamond industry so important to the continent’s economy.
Although this is a serious moral issue, the countries where diamond mines are controlled by rebels — primarily Angola, Sierra Leone, the Democratic Republic of the Congo, and Liberia — supply only a small percentage of the world’s diamonds. [Map of the World’s Diamond Mines.]
The Canadian diamond industry is engaged in an energetic campaign to market Canadian diamonds as an alternative to conflict diamonds. The promotion takes advantage of Canada’s reputation as a peaceful, socially progressive country, stressing that mining is done under ethical, environmentally friendly conditions.
Canadian diamonds are mined in the Northwest Territories. These diamonds often come with a Certificate of Authenticity in which the government certifies that the stone was mined, cut and polished in Canada and "qualified for certification by meeting the high standard of cut and other requirements established by the Government of the Northwest Territories Monitoring and Certification Programs."
Such a certificate may bear an official seal and logo, but it carries little specific information about the diamond. This Certificate of Authenticity is NOT a diamond certificate of any value to the insurer. It is NOT a certification of quality issued by a gemological authority, such as the Gemological Institute of America (GIA), and it is not an appraisal or substitute for an appraisal.
Some wholesalers have begun marketing Canadian diamonds under a brand name, such as Canadia. The CEO of one diamond wholesale company remarked, "Country of origin has always played a part in defining the quality of a product. Swiss watches, Italian leather, French wines. Why not Canadian diamonds?"
Interesting marketing strategy, but insurers and consumers should see it as just that. Regardless of the origin of the stone, the value of the diamond depends on the 4 Cs — Cut, Color, Clarity and Carat weight. Canadian does not constitute a "5th C."
A few wholesalers of Canadian diamonds inscribe the girdle of the stone with their name and a logo, such as a maple leaf or a polar bear. Laser inscriptions are not new. Diamonds are sometimes inscribed with the GIA Report number, as a means of identification. However, evidence that a diamond comes from Canada does not attest to its quality or value.
Politically conscious consumers are deliberately searching out "clean" diamonds, but they may also be overpaying. Some wholesalers are charging retailers 20% more for Canadian diamonds than for diamonds from elsewhere, and these costs are passed on to the consumer. This is all the more reason for the insurer to not depend on the sales receipt to support valuation, but to insist on a detailed appraisal.
FOR AGENTS & UNDERWRITING
Evidence that a diamond is from Canada says nothing about its value and therefore is useless to the insurer. Only a detailed appraisal (preferably on ACORD 78/79) by a trained gemologist gives the details necessary for determining value.
Look carefully at all diamond certificates. We recommend relying only on reports from the Gemological Institute of America or the American Gem Society. (For detailed discussions, see the issues for March 2002 and April 2002.)
Canadian diamonds are often overpriced, so do not rely on the sales receipt. Insist on an appraisal for valuation.
If the insured has only a certificate specifying a Canadian diamond and a sales receipt, the selling price may be inflated. To price a replacement, refer to the existing appraisal, and use >ACORD 18 to evaluate the appraisal. Adjusting a Canadian diamond is no different from adjusting any other kind, though promoters would like consumers to think otherwise.
Name Brand Diamonds
Are you better off trusting a name brand? Is this a guarantee of high quality? Our next issue will cover the branding of diamonds and what this trend means for insurers.
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