Hi, I'm Lillian Coulson, and I'm pleased to introduce today's webinar titled Accurately Valuing and Ensuring Jewelry. Please be aware of the IMUA statement. We are fortunate to have two esteemed presenters with us for today's webinar. Patti Giola is a graduate of Illinois State University and is the founder and CEO of Giola Appraisers in Dallas, Texas. She brings with her 30 years of expertise to every appraisal. Patti's nine years of experience as the Jewelers Mutual Chairperson of the Board, plus 15 years on the Jewelers Mutual Board of Directors, provides a unique perspective on value, insurance, and best practices in the jewelry industry. Patti holds the Associate in Risk Management designation, and she is a Gemological Association of Great Britain Fellow. She has authored and co-authored many publications, including RX for Insurance Appraisal Headaches in Modern Jeweler. Patrick Drummond has over 20 years of insurance experience in various leadership roles and underwriting, distribution management, marketing, product management, and claims. Patrick is currently the Vice President of Underwriting at AXA Excel. Prior to his current role, Patrick spent 10 years with Jewelers Mutual Insurance Company, where he served as Vice President of Enterprise Strategy and Vice President of Sales and Marketing. Patrick has served in management roles at companies such as Merchants Insurance Group, Century Insurance, and Selena Mutual Insurance Company. Welcome Patti and Patrick. The floor is all yours. Thank you very much. Thank you, Lillian. My name is Patti. Go ahead, Patrick. Thank you. Well, thank you, Lillian, and thank you for everybody for joining us today. Patti, if you want to go ahead and start. Yes. Lillian gave such a gracious introduction. There's really not a lot more that I could add, but I did want to mention that in addition to the credentials and the experience with the insurance company, I'm also with a lot of jewelry backgrounds, both wholesale, retail, brokering, and new as well as pre-owned, so I think I can probably address a fair amount of the questions towards the end of the presentation today. Perfect. Thank you, Patti. Thank you, Patti. And again, I'm Patrick Drummond, Vice President with AXA XL, and as Lillian stated, I have many years in the insurance world, but 12 years, the last 12 years specifically focused on the Inland Marine with 10 of those years at Jewelers Mutual where I had the pleasure of working very closely with Patti here, and in that role at Jewelers Mutual I had the opportunity to lead initiatives to grow their monoline personal jewelry insurance program as well as insuring personal jewelry here at AXA XL. So we hope we get a lot out of today's webinar, and again, at the end, we're happy to answer any questions that you may have. To begin, I want to walk through an agenda. First, why should underwriters love jewelry? You're going to hear two very passionate people talk to you today about jewelry and our love for it, but it's often not viewed as a desirable thing to insure in the insurance space, and we're going to talk a little about why you should love it and some tools to help you feel more comfortable with underwriting jewelry. We'll talk about common coverages available, why you should look at repair, replace versus cash out options, which is very critical to the profitability of a program, effective underwriting jewelry risk, common causes of losses, loss prevention, and then valuations, appraisals, and the jewelry industry, where Patty will talk in a lot more detail in that area. So why should underwriters love jewelry? If underwritten correctly, jewelry can be an extremely profitable line of business. I can tell you from many years of insuring jewelry and leading jewelry programs that if done correctly, you should not see loss ratios exceed the 40% range. In fact, they can be much lower than 40%. If you do not insure jewelry correctly, you're going to jeopardize your entire account. As many of you probably see today, there are a lot of companies out there focused on with monoline jewelry products, as well as companies that are now advertising specifically as part of their homeowner's product and their product offering to targeting the jewelry portion of the account to get the account in the door. So it's important that you have a good comfort in insuring jewelry and that you do it correctly. Jewelry is meant to be worn and appreciated. And I think sometimes as underwriters, we're focused on how do we protect the jewelry, where can we lock it up and eliminate as much exposure to that jewelry and something happening to it. But I think first and foremost, you have to understand the purpose. And the purpose truly is to be worn, to be appreciated. Jewelry, you're part of protecting and celebrating life events. I once was in a jewelry store, and I remember the jeweler saying to me, look around, there's nothing in here that anybody needs. And I'm very fortunate to get to celebrate the special events in people's lives, whether it's an engagement, birth of a baby, anniversary, wedding. We have the opportunity to insure those and provide the protection and the peace of mind that comes with providing that insurance. The typical coverages that you see in the marketplace I think are going to be pretty obvious for everybody. Theft, loss, that you truly lost the ring, left it somewhere, or a watch, et cetera. Mysterious disappearance, this is one that I think a lot of underwriters are sometimes uncomfortable with. A lot of people always want to know what's the difference between loss and mysterious disappearance. And it truly is, in the wording, mysterious. You have no idea what happened to it. I've seen a lot of companies want to exclude this level of coverage, but it is pretty much the commonplace in the market to offer it. And I think, again, if you underwrite the risk effectively, mysterious disappearance doesn't need to be a scary thing. Damage, not all carriers will offer damage, and some will even offer some wear and tear coverage. But damage is a coverage that you can purchase. And then typically all coverages are worldwide coverage. So why repair and replace versus cashing out? This is where I see a lot of carriers when they run into profitability issues on insuring jewelry or have concerns about the valuations of jewelry and properly indemnifying versus somebody profiting from an insurance claim. And really the key to this is controlling the claims process. If you choose to repair or replace the item, typically in the jewelry industry, jewelers are used to this. And you can work with the jeweler where you can send the customer back to their preferred jeweler, which they certainly will appreciate. And then you can typically settle the claim for the jeweler's wholesale cost plus 10% plus any tax where applicable. Now this is a general rule of thumb. In some instances, you may see a little higher percent than the 10%, but that's a profit margin that's usually baked in for the jeweler to get a return on the repair or replacement. Jewelers want to be involved in that process. They don't want to see their preferred client cashed out where they may not come back and purchase jewelry at all. Or they don't want to see them oftentimes sent to a specific repair replacement facility where they lose their client relationship. So you will find jewelers very cooperative in wanting to work with the insurance carrier. But this is, I think, a critical piece. Now some areas where that 10% may not always apply and where you may have to cash out unique pieces that you can't replace, an antique piece of jewelry, or oftentimes a designer piece where they're going to seek a higher markup on the profit side. But in general, this is a pretty good rule of thumb. When you choose not to cash out the policy, you prevent fraudulent claims. And this is the key to the programs that I've worked in in the past, really maintaining the profitability of the program and really avoiding fraud that you can get into jewelry programs with mysterious disappearance, et cetera. If the customer is not seeing a check, you avoid dramatically the chance that you're going to have a fraudulent claim. And then finally, delight your customer, which I think this is often overlooked, but in the claims process, obviously, you only talk to somebody when something bad has happened. And oftentimes this is a family memento or a memory. It's more than a piece of jewelry. So they want the easiest process of all. And I think sometimes from a carrier perspective, it's easy to cut the check. However, are we really doing the best service to the client? And sending them back to their desired jeweler to work with them to get the exact piece that they had replaced will be a better experience for the customer. They will appreciate it. And again, as the first two bullet points, you control the claims cost. Customer doesn't see what the wholesale cost was. Jewelers will be more than happy to work with you, and you'll be able to jeweler network over time. And again, you'll prevent those fraudulent claims. So effectively underwriting jewelry risk. Things that you should look for in underwriting a jewelry risk is, first of all, is the individual. Who is wearing the jewelry? And I say this because oftentimes you'll find where people will purchase jewelry for a spouse, significant other, and that is fine. There's usually no concerns with that. But oftentimes you'll see very expensive pieces of jewelry purchased for a child, somebody that's going off to college with a very expensive watch. Those typically can be red flags, and historically my experience of seeing those to be poor risk. So I think making sure that the owner of the jewelry is the wearer of the jewelry, they're not loaning the jewelry out, and they're not giving it to somebody that you may have some concerns regarding, are they going to be responsible with the jewelry? Occupation. A lot of companies will exclude celebrities, professional athletes. Obviously you want to look at the occupation, and I think the most important two things in underwriting jewelry, these first two jewelry points, you have to underwrite the individual. It's not so much focusing on the piece of jewelry as it is the individual. What do they do? Who are they? Are they going to be wearing this piece? And when they're not, where is this piece going to be? I will tell you, though, that the fact that they may be an athlete or a celebrity, I know a lot of companies that's an instant no. My thoughts on it personally and my experience have been, you know, it takes another step of underwriting, but there are good risks, and I have ensured throughout the years many celebrities and even pro athletes or musicians, but you have to be cautious and you have to make sure that you are effectively looking at the individual to know that you're comfortable and that they're going to be responsible with their children. Geography. Are you riding in an area that is a high-crime area? You'll want to take that into account. You know, 90210, if you know that this is an area where this person lives, you probably have a pretty good understanding of their, you know, who they are in the area and you can have a higher comfort level. But having an understanding of those places will help you get a higher comfort level on the risk. Security. Understanding, do they have an alarm system? Who has access to the premises? In some cases, in high-rise buildings, they may not have an alarm system, but do they have a 24-hour doorman that's going to vet people coming in and out of the building? But security is very critical. Just like ensuring any type of high-value risk, you want to know the physical security. Do they have a monitored alarm system? And if not, you know, who has access to the premises? Where is the jewelry stored when it's not warned? Is it stored in a safe? Do they have a safe within their home that they're placing it in? Oftentimes, with various coverages, you know, people will take very high-end pieces and put them in a safety deposit box. But having an understanding. I can tell you that, you know, everybody puts that safe in their master bedroom closet, which is probably the worst place to put that safe. And oftentimes, hiding the jewelry is a better option than putting it into that safe that is the first place in a burglary that they're going to go to. And unless it's a very large safe, oftentimes they're going to take the entire safe with them. But knowing, importantly, where the jewelry is going to be stored is critical. And then I think something that's often overlooked in a lot of underwriters, claims adjusters, and other people who don't have is partner with a trusted jewelry professional. Somebody like Patty or a retail jeweler that you can have trust in. That if you have a question about a piece of jewelry, that somebody you can pick up the phone and call and engage. As well as it's important that, and I'll hit on it slightly at the end, but to make sure your program's profitable, that you get back. And having a relationship with multiple jewelers that you can take some jewelry salvage and not just sell off the one jeweler, where you're not going to be an expert in knowing what the right value is, but if you can get multiple jewelers to bid on a piece, oftentimes you can get a higher return on your salvage. And Patty, you may touch on a little bit of that in your portion. But the salvage portion is something that should not be overlooked. So common jewelry losses. Theft, again, it's, I think a lot of people worry about the burglaries, people coming in to the home and taking everything. I can tell you based on my experience, most of those type of losses occur when you have workers in the home. We see that throughout my career. It's usually somebody was in the home doing work, painting, housekeeper, et cetera, and somebody did not have their jewelry hidden away or secured. So it's important that your customers, again, know where that jewelry is going to be kept, that they secure it when it's not being worn or hide it. But the number one cause I see in the theft area is typically that person inside the home that typically isn't there, they're there conducting some type of work, or they have had guests in the home for a party, and that's when the claim will come that a piece of jewelry will become missing. Burglaries do occur, but it's not as common, I think, as a lot of people think in the personal jewelry side, as you may see on the jewelry's block side. Loss, people do lose their jewelry. They will, oftentimes, they will lose and I've seen over the years claims where I took it off in the restroom to wash my hands and I forgot about it, I went back and it's gone. That is typically the most common. Oftentimes, with men's watches, you'll see that it was left in a golf cart. Again, it was taken off, or I was staying in a hotel room, I put it on the nightstand, so they know where it was at. But they left it somewhere. Mysterious disappearances is surely when they don't know. And oftentimes, that happens when the ring fell off, a clasp broke and the piece of jewelry is gone and they have no idea what happened to it. All they know is that it's gone. This is probably one of the more frequent type of losses that occurs, which is, again, going into Patty's portion, this is why you're gonna wanna understand what you're insuring and the values of what you're insuring. Because these losses are probably the most common. But they do happen and we'll talk a little about education and how you can prevent some of those. And then typically, what I've seen throughout my career is loss of the center stone. Throughout time, prongs wear down, stones get loose, and the stone will disappear and it's lost. Which, again, I'll talk a little more about in the loss prevention and the importance of educating your clients. Patrick, could I add one item? Please do. The other area of loss that I notice quite frequently is damage to the jewelry. So the center stone gets chipped or damaged in some way. And encouraging the clients or the policy holders to frequently update an appraisal will uncover that and will minimize the amount of the loss because it can be repaired and restored. Perfect. Which is a perfect segue. One of the things that we don't do a good job as insurers is educating our customers on what Patty just said. Encourage your customers to visit their jewelers regularly. Have their rings inspected. Have their jewelry reappraised. You know, catching a loose stone early or damage early will prevent a larger claim down the road. And years ago, a lot of companies used to require on very expensive pieces customers to go back every few years to get reappraised. One that can become quite a challenge to get it reappraised unless there was some major change in the market. But I have found, and I think Patty can attest to this, that you get a better response from your customer by just educating them on the types of losses they can have and the importance of visiting their jeweler and having their jewelry inspected. That will eliminate a lot of losses in that lost stone or the damage. It'll identify something early that it can be repaired before it becomes a much larger type loss. Identifying- Do you want me to bring up that poll or tell me when you want the poll? We'll do the poll right at the end of this slide. Perfect. Identifying red flags. You know, what are high risk clients? It's, you know, I mentioned, you know, there are some celebrity, you know, athlete-type clients that I think you want to be wary of, but I struggle to say you should not insure them because over the years I have insured, very probably, celebrities, musicians, athletes. But I do think you want to be cautious and thoroughly underwrite the individual and make sure that the underwriter has a comfort with this individual and the fact that they are going to take care of the jewelry. Understanding their occupation and making sure that they, you know, their occupation and what they do align with the values that they are reporting for their jewelry and their jewelry schedules, which goes to income versus value of jewelry. When I have seen issues in fraudulent claims that have snuck through the underwriting process, it's typically, you can almost go right back and look at both probably occupation and the value of the home and see a correlation between the value of the home and the value of the ring. You know, a $250,000 home and a $400,000 piece of jewelry, that usually doesn't, that should draw a red flag on the type of claim. And in those instances, I've seen many of those that have gotten through the underwriting process and in a mysterious disappearance claim follow shortly thereafter. Questionable documentation. When you're not comfortable with the documentation that you're getting, you know, I oftentimes will see, and you'll see oftentimes out of maybe some of the wholesale districts where you will get essentially a description that will say, ladies ring $175,000. Do I, as an underwriter, have a comfort knowing what I'm really insuring? No. So you need to have quality documentation. Patty will talk more about that. But you need either a descriptive bill of sale. A bill of sale, a receipt is not good enough if it's not telling you more about the item. And there are some jewelers that do very good descriptive bill of sales. And oftentimes you'll see this on some lower valued pieces of jewelry, let's say a $10,000, $15,000 piece of jewelry, where there'll be a very detailed descriptive bill of sale that will tell you about the diamond, the setting, et cetera. When you get into higher pieces, typically though, you're gonna want a legitimate appraisal. And either or are totally acceptable to take. And I put in the term legitimate appraisal because I know oftentimes underwriters, and certainly the underwriters I've worked with over the years, get these certificates that are often printed that say jewelry appraisal, and it will just list the value, and not a lot of description about the jewelry with a signature with no credentials after that. And frankly, that's not enough in order to insure. But Patty will talk more about what to look for in that case. And then prior losses. Frankly, prior losses should be very rare. For those of you on the phone today, I don't know how many of you have had a jewelry loss, but if somebody's had a jewelry loss in the last three years that is extremely outside the norm. And the last five years, okay, I guess it's possible. But statistically, that is just not the norm in insuring jewelry, based on my experience. I'm not saying that you should decline, you should always look into the circumstances of the loss. But more than one loss in the last five years falls extremely outside of the norm of what I've seen throughout my career. So Lillian, we could pull up the poll if you'd like. So just to recap a little, identifying underwriting red flags. We have some multiple choice here. But A, what would be an underwriting red flag? The jewelry owner lives in a coastal area subject to hurricanes. B, the customer only collects watches and no other jewelry. C, the customer only has a watch. D, the customer has a bill of sale and not an appraisal. And D, the customer is, home is valued at $150,000, but the ring they're looking to insure is valued at $175,000. And we'll give everybody the opportunity to vote here. All right, we've got 10. Can we get a couple more, and we'll walk through these? Perfect. So let's start with A. The jewelry owner lives in a coastal area subject to hurricanes. In all the years I've insured jewelry, they have been immune to cat losses for the most part. People leave with their jewelry. It's the one thing that they truly take with them when they have to leave in a hurricane. Now, you will, unfortunately, in some wildfire cat situations, you can take a loss. But that typically is not a consideration that I ever look at in insuring jewelry. The customer only collects watches and no other jewelry. I've had a lot of people come to me over the years with the perception that watches are very unprofitable. I will tell you, based on my experience, that single watches often are unprofitable. And I think because oftentimes, as I was talking before about that loss, they get thrown into a golf bag, a golf cart, left on a sink, in a hotel room, and they're forgotten. Watch collectors, on the other hand, are very passionate about their watch collections and historically have exceptional loss ratios. So I consider them a very good risk. The customer only has a bill of sale and not an appraisal. Again, that can be a maybe. Is it a descriptive bill of sale? And if it's a descriptive bill of sale and gives me the information that I need in order to understand what I am insuring, and most importantly, we have a claim, are we going to be able to adjudicate that claim effectively given the descriptive bill of sale? Then that is fine. But D, the answer that is the big red flag is obviously, and frankly, I see this a lot, is where jewelry will come through. And when you look at the home value, there is not a correlation between the two. So thank you for this portion, and I'll be happy to answer your questions at the end. And now I'll turn it over to Patty, who's going to talk about how do you get comfortable with valuations. Thank you, Patrick. The portion that we're going to talk about now is the appraisal side of the equation. And so what we're going to talk about from here on in, I'm going to give you just a little bit of overview. Now until the end of the presentation, we're going to talk about opportunities for insuring the jewelry, trends that are going to be impacting consumer purchasing of jewelry. We'll talk a bit about appraising, and then of course, we're going to have some time for questions as well. So the first thing that I wanted to share with you all today is that the jewelry market is expanding. Is this a little bit better? The jewelry market is expanding. Yeah, the audio is just a little light. If you can get closer to the audio device, great. OK. OK, thank you for that clarity. The jewelry market, the jewelry industry, I need to say, itself is actually contrasting. There are fewer jewelry stores that are in the world today. But the amount of jewelry that is being purchased is growing. In a survey that was done, excuse me, a market research program that was published in 2014, the jewelry industry represented $172 billion. And it's projected to grow to $292 billion by 2020. In essence, what they're saying, by 2020, the jewelry industry will be truly dynamic, global, and highly competitive. That's going to give you and your underwriters a lot of opportunity that I think you should be taking advantage of. And the McKinsey report, also dated 2014, says that the new trend in the industry is name brand. So for example, what they're trying to explain to you here is that the growth of branded jewelry, which is right now in single digits, is projected to grow from almost 10% to nearly 40% of the market by 2020. Much of that growth is going to be fueled by new money, consumers who feel the need to show off their newly acquired wealth. It's also going to be fueled by emerging market consumers, as well as young consumers. There's also going to be new growth in branded jewelry that is not already owned by the jewelry stores. So for example, Hermes and Dior are going to be getting more and more into the growth of branded jewelry. Some of that is going to present opportunity for you as well. This isn't necessarily just more jewelry, but higher dollar value based on bigger opportunity. The average size of an engagement ring in the 20th century before the second half was under a half a carat. By the end of the century, it was around one carat in size. And in certain markets right now, it's as high as between two and four carats. That's a combination of people waiting to get married a little bit later, second, and sometimes third marriages. And so the average engagement ring is getting quite a bit larger over time. So of course, that's going to present higher dollar value opportunity for you all. Female self-purchase. A lot of people are aware of that today, but it's particularly large in the jewelry industry. Some of the reasons that people are attributing this is a greater sense of self-agency. Women are better educated, and they know more what they want. They're not just looking for fashion statements anymore. Women are starting their families later. It's therefore allowing them more discretionary income. They have greater economic empowerment. Some of them just reference, because I can. They are marking an accomplishment, a milestone in their life. Online shopping has made a tremendous change. Our company sells online with first dibs, and we find that people will spend a surprising amount of money online, whereas before, that was a very small amount of their buying power. Social media is another area that has impacted women's willingness to self-purchase. So there's all sorts of reasons that the market itself is actually expanding. We have an extensive handout. We actually have two handouts for you today. One is the appraisal sample that you all already have, and I'm going to recalibrate the one that we will send to you afterwards, because the slides that are marked on there are a little bit off. So I will recalibrate that and resubmit it to IMUA, and then you will get a handout of some of the stats that I'm referencing right now, where you're just getting the image on the screen as it is right now. So hopefully, I've given you something to think about that says there's opportunity out there that you all should be considering going after. But how do you know what to look for? How do you know about jewelry appraising? I wanted to equate it to something that probably everybody on the call today can relate to, is real estate. And even though everybody likes to say location, location, location, we actually know that there are a few more variables that go into the value of a real estate. So these various variables that we've identified here on the slide are basically the same kinds of variables that you're going to get in any kind of property appraisal. Each type of property is going to have its own list, but this is going to hopefully get you started on the concept. I know some people are very good with underwriting fine art, so I wanted to make a comparison with that as well. With fine art, we're looking at the medium. We're looking at if it's an original, if it's a multiple. We're looking at the variables that impact fine art, the name of the artist, the size, et cetera. So there are really more similarities than there are differences. And I'm going to go into them here in a minute, but if you can kind of look at it from that perspective, that it's just a matter of figuring out what those variables are or trusting that the appraiser has identified those variables for you, then knowing what you're looking at is going to be pretty straightforward. When you are looking at an appraisal, you kind of need to talk about it a little bit, but you'll want to see if you're looking at a store's document, so whether that's the purchase receipt or whether you're looking at the appraisal or the appraiser. This would be where I'd like to ask you to put the poll question up there, if you would, please, or the credentials. So I'd like to ask you all to vote in here. What is most important when you're looking at a document? Would it be gemological credentials? Would it be appraisal credentials? Jill restore management credentials? Or both A and B? A lot of emphasis is put on gemological credentials, and I see a lot of people asking when they call our office, is she a gemologist, what are her gemological credentials? And they very rarely even understand what appraisal credentials, they pretty much think that if you've got a graduate gemologist degree, that's pretty much what you need to know. You can have one and not the other, or you can have both. But really, if you don't have both, you don't have any business holding yourself out as an appraiser. The correct answer is D, you need both. There you go, thank you, I didn't know if I was returning. So the credentials that you're going to be looking for, I've kind of already pretty much alluded to it. You can be a graduate gemologist of the Gemological Institute of America, and that's the one that a lot of people in the United States have. You can be a fellow of the Gemological Association of Great Britain, which is a higher, more difficult degree to obtain. It's not necessarily required on ordinary items, and it's certainly not required on even more expensive items. But suffice to know that if you see SGA behind somebody's name, it's the equivalent of a master's degree in gemology. Now, the appraisal credentials basically take your gemological credentials and help you, as an appraiser, know how to evaluate the various variables that are going to be used, and help to understand when something is already damaged or has slight abrasion or wear and tear, how do they craft the document so that it makes sense to the underwriter, or so that they know that they're not insuring something with inherent risk. Ideally, the more expensive that something is, the more you're going to want both a gemological The next area that you're going to want to look through is that individual's reputation. Just as you're underwriting a little bit your client, it's not that difficult to figure out if the person who wrote the document knows what they're talking about. So check out their reputation. Everybody has one. A few phone calls or some internet trolling will get the job done. But if you're going to look at the individual's reputation, you're going to want to look at their reputation and the internet trolling will get the job done. If you look at the document and you see a resume behind the document that shows what kind of continuing education that they're doing, ongoing certification, that's a pretty solid indication that whoever you're looking at knows what they're talking about and takes their profession seriously. So there are going to be some red flags. And in the time that we have, I'm not going to be able to tell you everything that you need to know, but we'll be able to go over a few things. Here's an example of something that is not acceptable. This isn't acceptable. First of all, you can hardly read it. It's scribbled all over. But this is an actual document that was given to us as what somebody wanted to use in order to insure their jewelry, I mean to say. So you're wanting to look for something that's a lot more professional than that. Appraisals 101, what is it worth? That's really kind of the bottom line when we get to what you're going to be insuring. So when you are looking at something that's really an appraisal and not just a sales receipt, you're looking for somebody who has research pricing information from more than one source. The receipt that they get with the purchase is just that. It's pricing data from a single source. It's not an overview of the market. So what you're looking for with the appraisal is something that is professionally documented, something that is typed. You're looking for photos, detailed description of the item. You're looking for the size of the stone, the quality of the stone. And the more important the item, the more likely you're going to have a reputable laboratory report to go with it. In today's world, many of you probably even already know this, although it's not real common yet, there are synthetic diamonds in the marketplace. And they are growing them in much larger sizes than before. So it's very unusual that a stone of any size is being sold to a consumer without some pretty specific documentation and from a pretty reputable laboratory, specifically the Gemological Institute of America. They are not the only ones that are qualified to grade diamonds, but they are the ones that are known for high integrity, high standards, and quality judgment when it comes to diamond grading reports. Another one that is also very well-regarded is the American Gem Society. So here is an overview of the kind of information that you're going to see on a diamond grading report. There is a report number on that report. There are the four Cs that everybody's familiar with. And any qualified gemologist can look at that document and can match it up to the diamond and can confirm for your client or for you that what they have in that piece of jewelry matches with that document. And when we do an appraisal, we do reference this document. We give the item number, the report number on there, and we make a formal statement that says this diamond matches this grading report. If we are looking at a diamond grading report that we think has been too generous with regard to the quality of the gem, we will either reference the diamond report and say that it was accompanied by that. This is where we agree with the report. This is where we disagree with the report. And we are valuing this piece of jewelry accordingly. So the more information that you see typed out like that, the more that you can feel confident that the person who wrote the report has taken the time to thoroughly examine it, to do some appropriate market research, and to communicate that to you. As professional appraisers, we are not just responsible to the people who have retained us. We are responsible also for anybody who we would knowingly know would rely on that document. So therefore, the underwriters and the claims adjusters have a right to rely on that document and to expect us to disclose as much of that information as we possibly can so that you have your eyes wide open as you are doing your work. That was pretty much a wrap of what I wanted to start for with you guys today. And I wanted to thank the McKinsey & Company, as well as the other folks whose documents, whose research I borrowed. And I wanted to thank Patrick with AXA for inviting me to join you folks today, as well as Eileen with the IMUA. At this time, I would be very happy, we would all be very happy to answer any questions that you might have. Thank you, Patty and Patrick. As Patty said, at this time, we'll take questions. And as a reminder, to ask a question, you'll type in your question in the Q&A pod, which we've just brought up. You should see it on your screen now. And then you'll click the balloon icon next to it, and we'll receive it immediately. We'll just wait a few moments for questions to come in. And we have our first question. Some insurance companies use an Inflation Guard endorsement. What are your views on that? Well, as an appraiser, I get asked that quite frequently. And I am not a fan. The reason I don't like the Inflation Guard endorsement is a variety of reasons. But the primary reason is that it is not an accurate reflection of the value of the jewelry. It is usually tied to the consumer price index. And there's no tracking with the jewelry industry or the consumer price index. Diamonds can be going in one direction. Pearls and sapphires can be going in a totally different direction. So to have an Inflation Guard endorsement that goes up every year so that the consumer doesn't have to worry about getting an accurate valuation is really not good business for anybody, because the jewelry can be damaged in between, and people are, as we already mentioned earlier, not being aware. And they should be getting some way to protect that or repair that in some form. And again, the dollar values do not march in lockstep. So if you currently do it, obviously, it's a plan that you all can continue. But I don't think it accurately marks the value. If I could add to that, Patty, from the carrier perspective, I have worked for companies that have done both. I can tell you that I agree wholeheartedly with Patty. Typically, it's a fixed number that does, over time, does not end up not aligning the value correctly to the piece of jewelry that you're insuring. Customers will look negatively upon that. And I've actually seen that companies that do that actually have impact their retention. Everybody, I think occasionally, an increase on your premium people don't look at. But oftentimes, inflation guards that continually have an increase year over year will drive somebody to shop and drive a negative experience for the customer. And then again, to reiterate, oftentimes, the inflation guard does not equate and not tied to the market trends or the indexes in the jewelry industry. So I do not recommend it either. Thank you. And I believe this question is for you, Patrick. What are the most common losses in jewelry claims? I think the most common loss is truly a loss. I lost my item. I lost my watch on a sink in an airport bathroom. I left it in the hotel room, and now it's gone. Oftentimes, or I threw my watch in the golf cart, and now I can't find it. I think that is probably the most common. I would say that would go close to that And this goes back to the education side. Educating your customers through social media is a great way to have a touchpoint with customers to let them know the value of the one that you understand jewelry, and two, the value of going back and getting items inspected can avoid those claims. But those are the two most common. Thank you. Thank you. And Patty, earlier in the presentation, you mentioned a designation that would be the equivalent to a master's degree. Could you go over that again? Just what does it stand for? Yes. It is called the Fellow of the Gemological Association of Great Britain. And the graduate gemologist degree is very much common in the United States because they are based in the United States. That is a pretty straightforward, multiple guest kind of a program. It's available in residence as well as by remote. The Gemological Association of Great Britain is very strict. It's a two-year program. You write out extensively. They don't have any Q&A as far as one question with four possible answers. It's like writing a master's thesis. When I did mine, the question was, you are given a parcel of red stones. You do not know what they are. How would you go about identifying what they are? And if you don't take about two and a half hours to answer that question, you probably won't pass that test because they expect you to have that many different answers as to what it could be and how you would test every one of those stones. It's very rigorous. And more people in the US are given the degree, but it's not as common. But it's a very highly regarded degree. Thank you. Another question, how often would you recommend jewelry items be appraised and at what threshold? And then there's another part. Some companies have a threshold of 100K and up where appraisals are required every five years. But anything below requires no appraisal. I'll start with this, and Patty, I think you could jump in. But I think first and foremost is a strong relationship with the jeweler in encouraging your customer to consistently go back and take their jewelry to be inspected annually, to have it cleaned. Most jewelers are going to clean it. So it's a good practice to get into. And then oftentimes, the jeweler themselves may let the customer know that, you know what? Maybe it's time. There's been changes in values. It's time to get an updated appraisal. As far as the threshold, I think that's really up to a company and their comfort level. I've seen it vary everywhere from as low as $25,000 up to the $100,000. So I think that's more of a company preference. I think it's the amount of time that goes through. And again, having a trusted jeweler who can give you some advice. But I'll let Patty give her thoughts. I pretty much agree with Patrick about the dollar value limit. That's a company-by-company response. I strongly encourage people to get their jewelry looked at frequently. And because of market fluctuations, three to five years is about a good amount of time, especially because depending upon how the jewelry is being worn, you can catch some of the concerns that you might have and prevent a loss. So even if the dollar values aren't moving dramatically, if a consumer is wearing their jewelry pretty harshly, we can either prevent a loss or minimize the amount of damage that's being done. The ladies that are wearing their jewelry almost 24-7 are knocking the heck out of those gemstones, and they are really damaging them pretty dramatically. So if we don't have an opportunity to look at those and encourage them to get them restored, then you may end up with a big loss on your hands if you don't have them looked at pretty frequently. So I say three to five years. If I could add to that, I think it goes back to education. I will tell you, I've worked at companies where we force people every so many years, and we had a worse response by making people do something as opposed to educating them on why they should do it. Nobody likes to be told what to do, but everybody wants to be educated how they can protect their precious jewelry. Is there an industry standard for the difference between the market value and an appraisal value? Oh, my gosh, that's a seminar by itself. There is in the appraisal world an understanding. Were you going to say something, Patrick? Yeah, I was just going to say this seems to be the number-one concern I hear from underwriters. They want to make sure that they're making sure that their appraisals are going to be the number-one concern I hear from underwriters. They feel like appraisals may be inflated, and I think that's the biggest fear in that regard. But Patty, go ahead. I'll let you finish. OK, so that's a different kind of a question as well. Historically, I'll pick up on that and then come back to the other one. So we shot ourselves in the foot to let you know how old I am. I started in the mid to late 70s. And that was during a period of time where we were having pretty strong inflation, and people were giving an appraisal at the point of sale that anticipated further inflation. So they basically taught consumers to expect something to be worth more than it really was. They got consumers so hooked on this that during the 80s, you couldn't hardly sell jewelry without giving them an appraisal for twice what they just paid, because you'd already taught them that it was worth more than what they just paid. So that has totally messed up the jewelry industry and the insurance industry and the consumers for a generation. We're slowly getting back to some sense of normalcy. So that's one of the reasons that you anticipate the appraisal was inflated, because it often is. The other reason is because dealers are now trying to convince consumers that they're giving it to them at close to wholesale, and everybody knows there's this big markup on jewelry, or they still believe, that in order to prove that, they'll just hand them a piece of paper that says it's worth twice what they just paid. Well, that's pretty naive to believe that you just bought something worth twice what it's worth. Anyway, so that takes care of that side of it. Now, the other question was, is there a difference between an appraisal and market value? Is that the way it was worded? Yes. Is there an industry standard for the difference between the market value and an appraisal value? There is an appraisal industry standard, yes. But the vast majority of the documents that you get are not written by certified appraisers. So there's a lot of misunderstanding with jewelers. They say they don't understand the difference between replacement value and insurance value. They think there's this big difference, and there really shouldn't be. The way people should be writing appraisals is to say, what would it take for you to get something similar to this item if you went out and purchased it today? And it's not being done that way. They usually look at, from the jeweler's perspective, what would it cost me to build this, and what would my markup be? And most of the time, that's irrelevant. So there is a standard. They should be writing appraisals that most of what you all see are retail replacement, or they should be, retail replacement for the purpose of securing insurance. If it's an antique, then we're looking to the estate market. If it's something that's currently in production and in reasonably good condition, then we're looking for what it would cost to replace it with like, kind, and new in the current market. Did that answer your question? Well, we'll see if they type in any additional comments. This is a little bit of a change. How do you see the synthetic diamond market affecting the real diamond market? That's a great question. Up until June, I would have answered substantially differently. But something happened at our annual trade show in Las Vegas in June, where De Beers made this major earth-shattering announcement that they were selling all of their synthetic diamonds at $800 a carat. And that totally tanked the synthetic market. That doesn't mean that they're not still going to be available for sale. Of course, they will be. And a lot of retail stores are carrying them now. So I think that if you're insuring a diamond over a certain size, and maybe you're underwriting department or claims department needs to get your head together and figure out how you want to do this. But any diamond over a certain size now, there's a vast dollar difference between what a naturally mined diamond sells for and what a synthetic diamond sells for. The way that we can really know for sure what something is worth is, what does it sell for on the secondary market? And right now, the synthetic diamond market just plummeted from about $10,000 to $20,000 a carat in a one-carat-plus size to about $1,500 a carat, assuming that De Beers' position is going to stick. I don't know what it's going to be going forward. But I do know that naturally mined diamonds will continue to be substantially more valuable. The jewelry industry does not want to knowingly repurchase synthetic diamonds. So that kind of tells you the distance between the value of the two. Thank you. That's our time. Thank you, Patrick and Patty, for an excellent presentation. Thank you also to our attendees for your participation and your interesting questions. All attendees will receive an email with a link to an electronic survey. Please take a moment to respond to the survey and provide feedback to IMUA. We'll use your feedback to help plan future education programs.

jewelry valuation

appraisal credentials

gemological trends

branded jewelry market

female self-purchases

appraisal frequency

market research in appraisals

jewelry insurance claims

synthetic diamonds impact

customer education on jewelry care