Insurance Undervaluation of Jewellery

wsmurray1

My wife lost her engagement ring which was bought in 1996 for £1145. We have claimed on the insurance but the settlement offer which is supposed to be replacement value is only £1574. That’s only a 37% increase in 13 years. A quick check of platinum and diamond prices show they have risen by over 300% (which probably means I’m under insured as maximum payout is £2500). I have the original receipt which the insurer says is vague but most importantly it has the value on it and date. So just simply applying some indexation to that value means they will be grossly undervaluing the replacement cost.

Does anyone have any advice on how to appeal the insurance valuation?

Many thanks

Stuart

ilikewatch

Remember that (unless you originally bought the ring as scrap), only a percentage of the retail cost would have been the intrinsic value of the gold, with the rest being workmanship, profit etc. (none of which have probably risen a great deal in cost since the ring was bought)

So if a ring bought for £1145 contained £200 worth of gold at the time, then the intrinsic value of the ring would now have been about £600 plus £945 for the workmanship etc. would give a current retail replacement cost of about £1545

InsideInsurance

The above is a point but that also depends on if you believe profit is a flat thing or a percentage. If they have a 200% profit margin then it goes up inline with the raw material costs.

Unfortunately this is partially the consequence of not keep full records and valuations up to date.

What was the ring? A solitaire or cluster? Do you know the details of the diamond(s)? Were any of them certificated? If so do you have their certificates? If not do you at least know their weight? Without it you really are at guesswork and standard index rates

wsmurray1

Unfortunately no details. In hindsight I should have kept up to date valuations but I just based it on the original receipt and added an estimate of the indexation value.

Does anyone know where to get the standard index rates from? At least that would be another point I could make. The fact is I know its under vlaues as a quick glance in any jewellers window tells us the replacement cost is going to be well over £2000. The only way I can think of to prove that without photographic or valuation evidence is to use the original value and indexation.

InsideInsurance

How can you tell?

The problem with jewelry is that they are very heavily quality dependent. a 0.5ct retail quality diamond is going to be an exceptionally different price to a 0.5ct perfect diamond

So looking on BlueNile a 0.53 flawless round diamond on its own is £2,848 where as a basic certified diamond of the identical weight is currently £642 and so an uncertified diamond would be probably ~£500. The higher up the quality index you go the bigger the difference even 0.01 ct makes. Assuming its not a perfect cut then you could have a broad shallow diamond which looks big because of the large table/top but actually is fairly light because of the lack of depth to it (and the poor cut would also reduce its value)


Using a retail price index then the value now would be £1,875.62

HHarry

We had some jewellery stolen last year. A platinum ring bought in 2011 for £1800 was settled at £2400, and a platinum pocket watch bought for £1700 in 2004 was settled at £3400.

We were surprised buy the settlement figures, but both pieces were antiques (1920's) and very difficult to replace. It may be that a more modern piece of jewellery could be replaced or re-made more easily.

wsmurray1

I can't tell if the quality of what I'm looking at now is the same as what we purchased but what we haven't seen in any jewellers is anything of that size in platinum for less than £2200.

I wouldn't use the retail price index as an indexation for jewellery as that based on a basket of prices where as precious metals and stones have increased at a far higher rate. For example just looking at the cost of platinum that has increased by 225% since 1996 (not the 300% I typed originally that was a typo). That alone would surely mean the insurance valuation us undervalued. Diamonds have increased by 100% although I guess that's an average. Poorer quality diamonds probably are less.

So breaking that down if the diamonds are poor quality that means most of the rings original value was platinum which has seen an increase of 225%. That's me probably hit my insurance limit of £2500 already.

If you assume it was good quality diamonds and so the value was split between diamond and platinum. You are then countering the insurance companies argument that the diamonds could have been poor quality which is what they are using to undervalue the replacement cost.

I am waiting on a call back from them tomorrow and I'll see what they say when I point out my concerns with their valuation. If I have no luck I guess its off to the Insurance or Financial Ombudsman.

nidO

wsmurray1 wrote: »

So breaking that down if the diamonds are poor quality that means most of the rings original value was platinum which has seen an increase of 225%. That's me probably hit my insurance limit of £2500 already.

That's not quite accurate because, as mentioned above, nothing like 100% of the cost of your original piece of jewellery is the value of the platinum and diamond used to make it, the vast majority of the cost is the workmanship and profit on the part of the jeweller, the raw materials are probably more like 20-40% of the cost.

If you physically cannot find *any* remotely similar items to yours then you have a case that it's undervalued, but the fact that you paid £1145 for it in 1996 and platinum has increased in cost by 225% since then does *not* by any stretch mean that a replacement will now be £2600 thanks to the increase in platinum cost.

Unfortunately without having proper records on the ring you are open to the insurance company lowballing you on its current value, because they will rightly take a middle to low estimate on the quality (and size) of the stone and workmanship, as you aren't able to give them any evidence to the contrary to argue it's worth more.

wsmurray1

Well we are getting there. Insurer has now offered £2103 after some further discussions. They now accept it was a "quality" jewellers and the quality of diamond would have been higher. They have also offered to make the replacement item identical the one we lost and to work with us to that effect. That's a much better option as we were just planning on replacing it with as close to same design as possible. Not sure how that is going to work in practise or what "quality" of diamond they will use but they are going to send me some details.

I note the comments above on margin etc. and using the CPI or s specific CPI for jewellery that I found is a more realistic way of adjusting for time value. I would say though that the margin makes no difference to the calculation of current value if you assume that margin has stayed the same over time. For Example

Original Cost £1000 and margin is 100% so actual cost £500 (I know not all the actual cost is the raw material but lets assume so for the example).
Say indexation is 50% so that's £250 so current actual cost is £750. Margin is 100% so that's a new value of £1500.

If you ignore margin and take the £1000 original cost and add on the indexation of 50% you have the same value of £1500.

Thanks for your posts.

InsideInsurance

You are assuming that margin is a percentage and remains flat. In practice it may not be a pure percentage, it could be stepped, capped, floored etc.

Looking at Gold prices:

They almost doubled and then prices crashed again to almost what they were 2.5 years ago and having just had our anniversary I can certainly confirm that retail prices have not almost halved despite the raw materials going down that much so clearly retailers margins are now higher than they were 2.5 years ago but unless you compared prices then to a year or so before that I cannot say if they went up directly with the raw materials or if they absorbed some of the initial increase in their margin.

rs65

wsmurray1 wrote: »

The only way I can think of to prove that without photographic or valuation evidence is to use the original value and indexation.

A long shot maybe but is the original jeweller still around? Any chance of records of what they sold you?

Maybe ask them or another independent jeweller what their view of current value would be.