Gold jewellery. Picture: AFP PHOTO/NOAH SEELAM
Gold jewellery. Picture: AFP PHOTO/NOAH SEELAM

Be careful who you ask to value your jewellery — overstated valuations can lead to all sorts of insurance problems.

The irony of the FNB safety deposit box heists a year ago is that those who lost precious jewellery — some of it passed down through generations — had handed it over to their bank for safekeeping because they couldn't afford to insure it.

When they lost it all, the bank pointed out that the contract they signed advised them to insure the valuables they placed in those boxes, and that the bank was not liable for any losses.

But what if the jewellery valuations those clients obtained were overstated, leading to the "unaffordable" premiums, and thus their decision to go the safety-deposit route?

Shital Naik of independent jewellery appraisers Central Diamond Administrations, which had dealings with many of the heist victims, says inaccurate valuations are rife.

"Our case studies have shown that many jewellers are underqualified to give valuations, and overstate valuations to make the sale appear to be a bargain. If the customer insures the piece, they are bitterly disappointed by the settlement when they make a claim."

The appraiser recently took three rings to five reputable jewellers for valuations, with shocking results — valuations for one ring, for example, ranged between R50,000 and R320,000.

Such massive variations are common, Naik says.

"A divorcee contacted us recently about a diamond ring which the jeweller who'd made it as a gift from her husband had valued at R54000. But when she later approached the same jeweller about selling it, he was only willing to offer her R1,000.

"She came to us with the ring and the valuation certificate, which stated the size of the diamond to be double its actual size. Our valuation, based on the actual diamond size and fair trade value, was R3,350."

Many of the complaints received by the ombudsman for short-term insurance pertaining to jewellery claims are based on consumers not having valuation certificates or being able to prove ownership of items they have claimed for, says senior assistant ombudsman Ayanda Mazwi — "and if they do have such proof, they are unhappy with the settlement values paid out by the insurers".

The terms and conditions of most insurance contacts give insurers sole discretion to decide how to value an insured item and the manner in which a claim is settled. The insurer will usually appoint one of its preferred service providers to provide a replacement quotation, which is used to quantify the claim, says Mazwi. The insurer may also elect to replace the insured item with its preferred service provider as opposed to paying an insured cash for the item.

"The valuation provided by an insurer's service provider may differ from the valuation obtained by the insured's jeweller or service provider, but as long as the insurer settles the claim on a like-for-like basis, this office is not in a position to challenge the insurer's decision," says Mazwi.

And therein lies the crux.

There can be no like-for-like replacement if the information on which the valuation was based is incorrect. A replacement "like for like" is only as good as the documentation that supports it, says Naik.

"When one has in-depth, detailed information about the item, there is very little chance that claimants will get an inferior replacement in the event of a claim."

A valuation certificate is a legal document, so it's important that the valuator has a recognised qualification, says Lorna Lloyd, CEO of the Jewellery Council of South Africa.

"In the current revision of our document on standardising valuation practices, emphasis will be placed on standardising diamond values, based on an internationalised price list," she says.

"Our aim is also to work more closely with insurance companies to encourage them to refer to our recommended valuation practices."

But ultimately, valuations are subjective, Lloyd says.

"Jewellers include clauses in their valuations stating that it is an 'opinion', and this covers them legally."

By dealing with jewellers who are members of the council, consumers would have recourse should they have a dispute.

"The council plays a mediatory role when disputes arise between consumers and our member jewellers."

Ideally, Lloyd says, consumers should have their jewellery valuations updated every two years, to account for price rises.

Get a professional valuation certificate

• Choose an accredited jewellery appraiser and ask to see their certification.

• Ensure that the valuation certificate has a full description of the item, and states:

• The weight of the components and the total item;

• The metal used;

• The manufacturer;

• The finish;

• The setting;

• The trademark or hallmark; and

• The condition of the item.

• If there are precious stones such as diamonds, the certificate should document:

• The weight;

• The measurements;

• The clarity;

• The colour;

• The cut;

• The fluorescence; and

• The depth and table of refraction.

A valuation certificate costs about R800 per hour's work - and most are done in under an hour. A valuation certificate does not prove ownership.

Source: Shital Naik, Central Diamond Administrations

Is your jewellery covered when it's in for repairs?

Given the prevalence of jewellery shop heists in South Africa, taking your jewellery to a store for a valuation or repair is risky because you may inadvertently lose your insurance cover.

Andrew Sokolich of Halcyon Financial Solutions, an East London-based insurance broker, has dealt with 175 claims relating to jewellery store hold-ups and safe-cracking in the past five years, and in most cases, clients' jewellery is stolen along with store stock.

Sokolich says it's virtually impossible for jewellers to have adequate insurance to cover all clients' jewellery.

And if the client has the piece of jewellery insured under their policy's all risks, and fails to inform the insurer that they've taken it to a store for resizing, remodelling or valuation, their claim is likely to be rejected on the basis of change of risk and failure to notify.

"And leaving your jewellery in a jewellery store for safekeeping is a really bad idea," Sokolich cautions. "They cannot hold items for clients unless they are being repaired or unless they have been invoiced in as consignment stock."