December 2017

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

GIA Diamond Reports - July

Not just a pretty face - August

Moral hazards on the rise - September

Hurricanes, fires, floods—and jewelry insurance - October

Inherent vice / wear-and-tear losses are rising - November

FRAUD UPDATE – lack of disclosure, false inscriptions & doctored docs - December

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

Growing 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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FRAUD UPDATE
– lack of disclosure, false inscriptions & doctored docs

An example:

A diamond was submitted to GIA for an updated grading report. The stone's girdle was inscribed with a GIA report number.

This should have been an easy update. But it turned out to be fraud.

Here's what GIA found:

The qualities of the diamond being tested did not match those on the original report.

This sample being tested was:

Additional testing showed this stone to be:

This incident is worrisome because it exemplifies the increasingly elaborate schemes for passing lab-made stones without disclosure. 

Value of mined diamond v. lab-made

Lab-grown diamonds are in all respects diamond. The issue is how they were created.

Although diamonds grown in a lab have the same composition and properties as mined diamonds, lab-made diamonds are priced about 30% below mined diamonds of similar size and quality. And growers are setting their targets to get the price down to 50% that of mined diamonds!

Since the lab-made sample above was not only lab-made but of lesser quality than the diamond it purported to be, the value difference would be much greater. If this diamond were sold—and priced—based on the description in the GIA report, the buyer would have been seriously cheated due to the pricing difference.

Diamond-growing technology

Labs have made industrial-grade diamonds since the 1940s. Valued for their hardness, these diamonds were used in cutting, grinding and polishing procedures. Qualities like color and clarity were not relevant.


Courtesy of Gems & Gemology

About 15 years ago labs began to start manufacturing gem-quality diamond. Early efforts could produce only small, off-color stones, which were often enhanced to deeper colors and marketed as fancies. Improvements in growth processes now make it easier to grow colorless diamond, and to maintain growth over a long enough period to produce larger crystals.

The graph at right, showing the colors of lab-made diamonds submitted to GIA for grading over the past decade, gives a sense of the progress toward producing colorless diamond.

Now both color and size barriers have been overcome, and the number of diamond-growing labs around the world is increasing. GIA foresees ever-growing production of lab-made stones, especially in melee and in stones over 4 carats. The increasing number of lab-made stones, and the improved quality, increases the risk of fraud.


Lab-made stone identified by manufacturer

Recognizing lab-made stones

Gems from the best diamond growers are almost indistinguishable from mined diamond. 

Reputable manufacturers are proud of their work and inscribe their name on their gems. They also properly advertise them in a way that does not mislead the buyer.

However, not all manufacturers want to be known. Distinguishing synthesized diamond requires very expensive equipment, far beyond the reach of an independent jeweler or appraiser, or even of most gem grading labs.  

GIA is one of the few diamond-grading labs with the necessary equipment and the means to continually update its expertise in this rapidly changing field. The GIA lab deliberately studies stones from known manufacturers, so graders can familiarize themselves with features that distinguish lab-grown gems.

But in the marketplace, a lab-made stone could easily be passed off—and priced--as mined.

How common is this fraud?


Parcel of several larger diamonds

Short answer: We don't know. This subterfuge could occur anywhere along the purchasing chain: wholesale buyers, jewelry manufacturers, retail jewelers, consumers.

Diamond buyers purchase stones in parcels containing several diamonds to several hundred diamonds. Over the past few years there have been a number of reports of lab-made diamonds mixed in parcels of natural mined diamonds. Sometimes the majority of diamonds in a parcel are found to be synthetic.

It's not common practice for wholesale buyers to have each diamond in a parcel individually lab-appraised, as the cost would be prohibitive. This is especially true for melee, the tiny diamonds used to offset a center stone.

Melee diamonds can be as small as 0.001 ct (1/1000 of a carat). They are produced in large quantities in factories, and sold in parcels of 100 carats or more (that could be tens of thousands of pieces) to jewelry manufacturers who set them in jewelry.

In fact, retail jewelers rely on manufacturers to supply them with "semi-mounts"—rings of various styles that are already set with melee, so only the larger stones need be added.  The customer can choose her setting from the jeweler's (or website's) display of semi-mounts, then choose a center stone.

The picture shows a selection of semi-mounts from a site for consumers; retailers have access to far more style choices, some pieces containing dozens of melee diamonds.

It is unlikely today that manufacturers test all the melee in semi-mounts they send. As technology improves, we hope this will change.

Similarly, jewelry retailers do not have the means to test the diamonds they sell to determine whether they are natural or lab-made. They take the word of their supplier, or they may just assume the diamonds are natural. This situation is a court case waiting to happen. No doubt a retailer who neglects full disclosure will ultimately be found liable for treble damages.

On a jewelry appraisal, melee will be simply described as diamond. A color range and clarity range will cover all melee in the ring, and the carat weight will be given as a total of all the tiny stones.


Details of one Semi-Mount

For large diamonds, parcels salted with synthetics would mean a serious financial loss for the buyer. Even if a manufacturer or jeweler discovers a gem is lab-made, he may decide to use it without disclosure, to avoid that loss.

Once in the jewelry, the lab-made stone may not be properly identified unless the jewelry is damaged. And perhaps not even then, because few labs are equipped to identify lab-made stones, and currently few insurers require verifying a stone's quality before settling a claim.  But this, too, will change—out of necessity—and that will mean further tightening of the jewelry insurance market.         

GIA inscriptions and reports

Forging a GIA report number adds another very serious level of fraud. It trades on GIA's reputation as the most respected diamond grading lab. "GIA" on a stone or lab report puts everyone at ease; supplier, manufacturer, retailer, consumer, insurer all may give the stone a pass.

Information on GIA lab reports since the year 2000 is available from GIA's website, allowing a consumer or insurer to check a report number. But if a valid GIA number is fraudulently inscribed on an inferior stone, a non-gemologist might overlook quality discrepancies like those described in this article.

With the proper equipment, inscribing a stone is not that difficult. Removing an inscription is even easier, as it can easily be polished off. Without the inscription identifying a stone as lab-made or giving the name of the manufacturer, a lab-grown stone can easily be sold as a mined gem.

Producing counterfeit GIA lab reports is an ongoing problem. One scam involved producing bogus GIA certs to support clarity-enhanced gems. NOTE that GIA does not grade clarity-enhanced stones. If you see a GIA report on a clarity-enhanced diamond, you know the report is fake.

And just last year the industry was shocked to see blatant advertisements for fraud. A Chinese online portal offered "Lab Grown Diamonds with GIA Natural Certificate[s]." Another site, describing itself as "India's top online market," offered a similar product. Both sites were removed after negative notoriety, but who knows if more have cropped up?

We assume the marketers are buying GIA reports on mined stones (available from online auction sites and through other channels), then having lab-made stones cut to match the reports. There is also trafficking in "empty" GIA reports—forms without stone information filled in—so any stone of any quality can appear to be "certified" by GIA.  A good question is, what is GIA doing to counter this?

A closing note: Disclosure

Ultimately, it is the seller's responsibility to know his merchandise and to tell a purchaser if a diamond is lab-made.  However:

In a survey reported in one jewelry trade magazine a few years ago, 97.4% of the responding jewelers said they disclosed lab-made gems verbally, but only 50.4% disclosed on the sales receipt.

Caveat insurer! You'll never hear those verbal disclosures. Be sure to get the details in print on an appraisal from a disinterested, credentialed gem and jewelry appraiser: a GG, FGA+, or equivalent, who has additional training in appraising for insurance. One course offering such training is the Certified Insurance Appraiser™ course.

FOR AGENTS & UNDERWRITERS

Lab-made diamonds are being sold without disclosure. For now, the insurer's best protection against fraud is to get complete documents: the sales receipt and proof of purchase, a detailed appraisal from a trained gemologist appraiser, and multiple photos of the item. With today's smart phones, clear close-ups of jewelry are easy to take.

For all quality jewelry, request a JISO 78/79 appraisal that gives a detailed description of the jewelry. This appraisal is prepared by a trained gemologist (GG, FGA+, or equivalent), who has additional training in appraising for insurance. One course offering such training is the Certified Insurance Appraiser™ course.

An appraisal should state whether the gem is mined (sometimes called natural) or lab-made.

Be alert to terms used for lab-made diamonds, such as lab-grown, man-made, created, synthesized, cultured. Lab-made diamonds are valued lower than mined diamonds.

HPHT (high pressure high temperature) and CVD (chemical vapor deposition), two methods of creating gems in a lab, are terms that may appear on the appraisal or other docs.

HPHT is also used as a treatment on lab-grown and on mined diamonds. Note that these terms mean the stone has a lower valuation than an untreated mined gem of similar quality.

Despite the scam involving fraudulent GIA certificates, a diamond report from a reliable lab is still good practice. We recommend the following highly respected labs and suggest that you use these links to verify reports you receive.

GIA Report Check
AGS Report Verification
GCAL Certificate Search

If you have any reason to suspect a diamond report is bogus, it may be worthwhile to consult the lab directly. 

GIA      800.421-7250 ext 7590
AGS     866.805-6500
GCAL   212-869-8985

FOR ADJUSTERS

With diamonds, the price difference between natural and synthetic is far greater than with most other stones. Mistaking a synthetic diamond for a natural could mean an overpayment of tens of thousands of dollars.

The sales receipt is important. If there is a huge difference between the purchase price and the appraisal valuation, it's a good indication that something is amiss—the stone's qualities are exaggerated, or the gem has color or clarity treatments, or the gem was made in a lab. All these conditions lower the value of a gem.

The diamond industry is struggling to develop dependable and low-cost solutions for detecting synthetics. For larger diamonds that are damaged, it is practical to send them to a large lab such as GIA, which has the latest equipment for identifying lab-grown gems.

Read carefully all documents on file. Do not assume that a gem is natural/mined unless that is specifically stated on the appraisal. It may be time to have all jewelry claims adjusted by a senior adjuster with jewelry experience.

Comb the documents for words meaning synthetic, such as created, grown, lab-made, man-made, lab-grown, and cultured diamond.

A brand name on the stone's girdle or in appraisal documents may indicate a lab-made stone. You'll need a microscope or jeweler's loupe to be able to read an inscription.

If an appraisal contains brand names or terms unfamiliar to you, checking with your staff jewelry expert could save settlement costs.

Always have the damaged jewelry examined in a gem lab by a trained gemologist (GG, FGA+, or equivalent), preferably one who has additional training in appraising for insurance. One course offering such training is the Certified Insurance Appraiser™ course.

 

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