Rising diamond and precious metal prices could leaver jewellers underinsured, warns Marsh

Jewellery collectors are at risk of underinsurance in the wake of spiralling diamond and precious metal prices, warned Marsh.

Over the past 12 months, the price of large diamonds has increased by an average of 30% while platinum has almost doubled, outstripping general price inflation, said the broker.

Sara Dunn, client executive in Private Client Services at Marsh, explained: “It is the responsibility of the policyholder, not the insurer, to ensure that their sums insured adequately represent the cost of replacing items. If they do not, in the event of a claim, they will receive no more than the sum insured or the single article limit, leaving them out of pocket.’

“Generally, insurers will apply index linking to insurance policies based on the General Index of Retail Prices, rather than an index which specifically tracks changes in the cost of jewellery. While the sum insured for specified items will increase in line with inflation, it does not necessarily mean that it will keep pace with increases in the jewellery market. Unspecified jewellery cover is also subject to index linking by insurers. Unspecified jewellery cover always contains a single article limit which can be easily exceeded if valuations are out of date.

“Jewellery often has a sentimental value and as such is irreplaceable. But, by having it revalued on a regular basis, insureds have the comfort of knowing that they will be compensated for its full value should the worst happen.”

Marsh recommends that items of jewellery are revalued every three to five years.

Case study:

A Marsh client had key pieces in his diamond collection appraised at the end of 2007 for insurance purposes. Acting on Marsh's advice, he had the items reappraised in June 2008 to find that the value had increased by 43%. Marsh worked with the insurer on the client's behalf and his insurance cover has been adjusted accordingly.