Insurers used to pay out on jewellery claims without a proper valuation and verification process. But professionals have entered the market and changed all that.
The Victorians loved jewellery. It was ornate, decorative and bought by successful businessmen who lavished expensive jewels on their wives to display their wealth.
But it wasn't actually worn. The Victorians' approach to jewellery insurance and loss was to make an imitation to wear and hide the genuine gems in bank vaults for safekeeping.
How the world has changed since then. Today, affluence has meant an explosion in the country's stock of valuable and cherished possessions. Research shows consumers now spend £3bn a year on jewellery.
And as more money is spent, claims spiral. Jewellery losses cost the industry £250m a year, with 300,000 claims being made. Insurers have not sat idly by. They have changed their ways. Previously, when a claim was made, insurance companies relied on the schedules and the genteel honesty of the claimant. Now the emphasis is on proof and substantiation.
That's all well and good, but someone forgot to tell the brokers. The inevitable consequence is that customer expectations have not been met and the industry is once again talked down at dinner parties around the country.
A typical scenario is that a claim is made and unsupported by pre-loss documentation. Customers come up with post-loss estimates. Are these accurate?
Values suggested by claimants were recently compared with those assessed by professional jewellery valuers on a database maintained by Loss Management Group.
Value today
The distribution of values showed an enormous range, with some claimants underestimating the current value of their loss, while an even larger number exaggerated. Not surprisingly, less than 30% came near to the correct value.
The difficulty is that claimants react differently when asked to provide an assessment of value post-loss. Some simply produce an original receipt or recall how much they paid for the item, perhaps ignoring the fact that their insurance policy promises to meet liability at today's value. Depending on how long ago the original purchase was made, this tends to underestimate today's current value.
Others - perhaps recognising that their insurance company doesn't have a clue as to what was owned in the first place - look around at the prices in the high street. They then submit a figure based on the best price they can find. Inevitably, this tends to produce exaggerated and inflated estimates.
While the cynic might argue that insurers should just take the underestimates along with overestimates, the more far-seeing underwriter would prefer a claims culture that does not penalise the honest and reward the unscrupulous.
Under the new scheme of things, instead of allowing the claimant to direct the setting of post-loss value, insurers appoint jewellery experts and valuers to gather objective descriptions and pre-loss evidence from the claimant, so that a professional view of its current value can be computed.
The process is totally transparent and the expert has to justify to the insurer, on a case-by-case basis, the rationale for his or her view of value.
There is an increased onus on customers to keep and provide any evidence that confirms their ownership of the items and details of their value. Such substantiation is vital material for jewellery experts in their establishment of the correct
current value.
The other fundamental shift has been in the insistence by insurers on settling claims with replacement jewellery rather than cash.
While the advantages to the insurer are evident, it would be far better to communicate this to the customer when the policy is sold to avoid confrontation later on.
More evidence
So, to avoid unnecessary and destructive confrontation over claims, brokers need to spread the word: when it comes to jewellery, your insurer will direct the claim to product experts, who will need your customer to provide as much evidence as possible to prove ownership and value.
And once the value has been established, your customer needs to expect comparable jewellery up to the level of this value and will not be given the opportunity to liquidate his cherished possessions.
Tony Le Fevre is the managing director of jewellery specialist, Loss Management Group
Case study: the lost gold bracelet
In December 2002, Mr E, who had lost a 9ct gold identity bracelet, submitted a claim to his insurance company. In support, he produced a post-loss estimate from a jeweller to whom he had allegedly described in detail what had been lost. The estimate was £875. However, the jewellery experts appointed by Mr E's insurance company required pre-loss substantiation of value to justify their validation to the insurers. This was provided by a combination of Mr E's description, the original price paid in 1990 and some holiday snapshots. The current replacement price of a similar item was then assessed at £700.
