Jewlery is a popular gift for Valentine's Day. Make sure your client's new investment is protected no matter what.
Insurance losses related to personal jewelry are huge—more than most insurers realize. Seventy percent of all personal property (contents) theft losses are jewelry, according to Department of Justice statistics.
Jewelry claims usually fall below the radar for both insurers and agents because the cost of the settlement is small. However, if the jewelry is on a homeowners policy, the impact of the claim can be huge.
Jewelry Scheduled on the Homeowners Policy
Unlike most household contents covered in a homeowners policy, jewelry is small, valuable and very vulnerable. Jewelry is not only stored in the home, but jewelry also travels. It's worn and often forgotten about as we go about our business, taken off and left on a dresser or sink, regularly exposed to damage and loss.
At home or out on the town, jewelry is a magnet for theft and it's particularly prone to “mysterious disappearance." Also, unlike other household contents, jewelry is uniquely prone to damage claims.
When a claim does occur, carriers that report to the comprehensive loss underwriting exchange (CLUE) or the property insurance loss register (PILR) report personal article floater losses as “property losses." So, if lost or stolen or damaged, jewelry that is on a homeowners policy is counted as a homeowners loss.
Mysterious disappearance is the most common peril associated with a jewelry loss. Even if the homeowners policy does not cover mysterious disappearance, once the insured makes a claim, the carrier reports it to the databases.
Once homeowners-scheduled jewelry losses hit CLUE and PILR underwriting reports, the losses live on, seemingly forever. Even if the insured finds the jewelry or withdraws the claim, the CLUE and PILR listings remain. Because a ring lost a stone, the client could lose their homeowners “claim-free" rating.
In some cases, jewelry claims may even lead to the insured's loss of homeowners coverage with that insurer. Homeowners policies with losses are much harder to place with another carrier. Weather-related events—forest fires, tornados, earthquakes, hurricanes, floods—have exacerbated the problem. Many agents already face shrinking markets and rising rates for homeowners policies as insurers seek to protect themselves from disasters, and no one needs a prior loss that makes placing homeowners policies even more difficult.
In addition, homeowners policies usually have restrictions and capacity limitations for jewelry. Many carriers are not willing to write jewelry valued more than $10,000-$20,000, which means it can be difficult to find a policy that adequately covers jewelry and offer the client a competitive price.
Downsides of the Personal Articles Floater
A standalone jewelry policy—a personal articles floater— addresses the jewelry exposure by offering broader coverage, including covering mysterious disappearance. Most floaters also have higher limits than typical homeowners policies.
However, if a standalone policy is with an insurer that reports to CLUE and PILR, as most homeowners insurers do, losses covered by the personal articles floater will be included as part of the company's aggregate loss report. Therefore, any jewelry claims can still impact the homeowners policy.
Just as auto experience can impact account rating, jewelry claims can be an unpleasant surprise. Check with your carriers to see if a jewelry loss counts against the client's homeowners experience. If they say it doesn't, get that in writing.
The Solution: Standalone Policy with No Reporting
The best choice is a standalone policy with an insurer that specializes in personal jewelry coverage and does not report to CLUE or PILR. This solution saves the client money because such jewelry policies are quite competitive. Some insurers even offer premium discounts not available on homeowners coverage.
Of great significance to the client, this choice means a jewelry loss will not affect the homeowners policy and the client's claim-free status.
A word of caution: Not all standalone jewelry policies offer a cash settlement option. Some only offer a repair-or-replace option. This could have devastating consequences for the agent, even if the agent only recommended the insurer. Not informing the client that a carrier offers only repair-or-replace settlements could leave the agent open to an errors & omissions claim. Even short of such extreme consequences, a dissatisfied client at claim time can retaliate by taking their business elsewhere.
Keeping Your Client's Business
Jewelry is usually a low-premium item at $50-$250 a year. Some agents don't want to bother with it and simply refer their insured elsewhere for jewelry coverage. However, some insurers that specialize in jewelry insurance cross-sell all kinds of insurance through affiliated companies, meaning that any insured you refer to them could be cross-sold all their other coverages. Don't risk losing a client's current and future business by referring a jewelry policy to an insurer that cross-sells.
Regardless of its valuation, jewelry usually has great sentimental value to the client. Jewelry can be the cornerstone of all your business with that client, both personal and commercial. Rather than simply referring a client to a standalone jewelry insurer, it is better to seek a direct appointment and place coverage yourself. That way you retain control of the account and enhance the client's trust and reliance on you.
David W. Hendry Jr. is the founder and CEO of JCRS Inland Marine Solutions Inc. He is the author of two books, “The Jewelry Inventory and Sales Classification Manual" and “Jewelry Insurance: The Underwriting and Claims Reference Manual."