October 2015

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

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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Insuring a Rolex - steps to take, things to consider

Appropriate coverage for a watch sometimes requires investigation. Here's an example.

  1. The client wanted to insure his new Rolex and brought in the warrantee card.

    The card is in French and names a European distributor as the authorized Rolex dealer. But it does not name the purchaser, as it should. A Rolex warrantee only holds for the original purchaser, which is why the purchaser's name should be here. The insurer wondered why a date of sale was filled in, but not the purchaser's name.
  2. The client said he bought the watch from a store in California, not in Europe. He said he knew the store was not an authorized Rolex dealer. In further conversation with the underwriter, the client mentioned that the retailer said the watch was new and had only recently arrived from New York.



    Warranty Card


    What we have so far: This watch, presented to the customer as new, had passed from an authorized Rolex dealer in Europe to a New York entity (probably not an authorized Rolex dealer) and then to the California retailer (definitely not an authorized Rolex dealer)—and perhaps through others along the way—before it reached the customer.
  3. Rolex considers any watch not acquired directly from an authorized dealer to be second-hand—not new—regardless of whether or not it has been worn.

    The watch was sent to Rolex for an appraisal. What came back was not an appraisal of this watch, but a description of that model watch and the suggested retail price for a new watch of the same model.  

    Rolex's response authenticated the watch, substantiating the seller's claim that this was a genuine Rolex and not a fake. This is important verification, since Rolex is the #1 faked watch, as we've discussed in an earlier issue on counterfeiting Rolexes.
  4. The insurer had an expert look into the details of the watch. It turned out that the model of the watch, Oyster Perpetual, is still made, but the serial number indicates that this particular watch was made prior to 2009.

    So we can guess a little of the watch's history. The authorized dealer in Europe had this watch and probably others sitting in inventory for several years and decided to move them along. He sold them at a reduced price to another retailer, who also moved them along, and eventually they wound up at the California store. Such activity is not uncommon, but is it ethical? Was the age of the watch disclosed? Probably not.
  5. This watch is no longer new, as the retailer claimed. If it was priced as a new watch, the customer overpaid, and he was probably not told that the watch is no longer under warrantee by Rolex but by the dealer. Whether or not the watch has been worn, Rolex doesn't consider it new, and neither should the insurer.

Insurer's problem: Valuation

The document from Rolex states, under "EVALUATION":

Rolex does not sell or appraise previously owned watches. The value stated above is that of a new watch of the same or current equivalent replacement model and bracelet. This figure does not account for depreciation of the watch, damage to the watch, or for the present condition of the watch evaluated herein.

Rolex gives as replacement value the MSRP (manufacturer's suggested retail price) of a newly made Oyster Perpetual. And this is what many appraisers would do for watches—look up the price of the current model and list that on the appraisal. Is such a valuation reasonable?

For all jewelry, the settlement is determined by the value of the piece at time of loss. Unlike other jewelry, watches are subject to depreciation.

While other jewelry may increase in value based on market fluctuations for gems and metals, watches (except in the rare case of a collector's item) decrease in value over time. They are mechanical in nature and parts can wear out. The manufacturer generally makes improvements on any given model, so even if the watch hasn't been worn, an older one most likely is not like the newest model.

As you would not replace a 7-year-old Lexus with a new one, neither should you replace a 7-year-old Rolex with a new one.

Another important point about valuation: Most authorized Rolex dealers offer discounts of 15-20% on new watches. So, even for a new Rolex, the MSRP is inappropriate because it doesn't reflect the usual retail price. To value a vintage watch with the MSRP of a new one is especially unfair and misleading to the customer. Such a valuation sets up the consumer for higher premiums than necessary and, in case of a loss, false expectations about the settlement.

Check out our more detailed discussion of excessive valuations of Rolexes.

New for new, vintage for vintage

The insurer is obligated to replace with like kind and quality. For a loss claim on a new watch, one that is still under Rolex warranty, the company would properly replace it with a like-model new watch.

For an older watch, the insurer would go to the huge secondary market for vintage watches (that is, the used watch market) and find a model comparable to the one lost. The ever-growing online vintage Rolex market has been described as "bursting at the seams." 

Description: http://www.jcrs.com/newsletters/2014/images_10_14/bobswatches_rolexes_sm.jpg

For a cash settlement, the settlement amount would equal the insurer's cost for a replacement from the vintage market—just as is done with automobiles!

FOR AGENTS & UNDERWRITERS

Customers may be surprised to learn that a Rolex from an unauthorized dealer is not covered by Rolex's warrantee, even though the customer has the warrantee card and the watch has never been worn. Many consumers are not aware that luxury watches bought from sources other than an authorized dealer may be counterfeit, despite any logos or trademarks.

Ask for the sales receipt. If the seller was not an authorized Rolex dealer, the watch is regarded by Rolex as previously owned. And there's also the possibility that it is counterfeit.

Insuring a vintage Rolex for the value of a new one means

Insisting on complete information about the watch protects both the policyholder and the insurer.

Not all jewelers or appraisers are competent to appraise luxury watches—to open the watch and inspect it, to judge the authenticity of the watch and all its parts, and to recognize non-authorized aftermarket add-ons or even out-and-out fakes.

It may be necessary to send a Rolex to an authorized dealer, or to the company itself, for an appraisal. This may seem pricey to the insured, but it should be considered part of the price of owning a luxury brand-name watch. Rolex can verify that the watch is genuine Rolex in all its parts.

FOR ADJUSTERS

With the exception of rare collector pieces, watches begin losing value as soon as they walk out the door, just as cars decline in value the minute they drive off the lot.

Do not replace a vintage Rolex with the current model. The customer is not entitled to betterment with a new model. Seek a replacement of like kind and quality in the vintage watch market.

Be on guard against fraud. If a policyholder discovers he has inadvertently purchased a counterfeit watch he may decide to lose it and cash in.

Losses on men's Rolexes can be expensive. If you suspect a watch is counterfeit, consider consulting a jewelry insurance expert to help resolve the issue.

Before settling a claim on a Rolex, you may find it useful to review our series on Reasons Not to Insure a Rolex.

 

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