Author: David Hendry
Insurance losses related to jewelry are huge — much more than most insurers realize. According to Department of Justice statistics, 70% of all personal property (contents) theft losses are jewelry. Insurance companies process billions of dollars in jewelry losses each year. Some of these jewelry losses are hidden because they're reported as “contents" losses under a homeowners policy, rather than as jewelry.
Jewelry claims usually fall below the radar for both insurers and agents because the cost of the settlement is comparatively small. But if that jewelry is on a homeowners policy, the impact of the claim can be huge.
Why Not Schedule Jewelry 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 put on and usually forgotten as we go about our business, taken off and left on 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.
It's rare to find a homeowner insurer who does not report to CLUE or PILR, because access to those services requires reporting claims. Many bureau-reporting carriers report PAF losses as “property losses." So, if lost or stolen or damaged jewelry is on a homeowner policy, it counts as a homeowner loss.
Once HO-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 homeowner “claim free" rating. Jewelry claims may even lead to the insured's loss of HO coverage with that insurer.
Homeowner policies with losses are much harder to place with another carrier. Weather-related events – forest fires, high winds, tornados, earthquakes, hurricanes, floods – have exacerbated the problem. Many agents already face shrinking sources and rising rates for HO policies as insurers seek to protect themselves from disasters. Prior losses make placing a homeowner policy even more difficult.
“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. These claims can kill the option to remarket the HO policy.
In addition, homeowner policies usually have restrictions and capacity limitations for jewelry. Many carriers are not willing to write higher-value ($10,000-$20,000) jewelry. It can be difficult to find a policy that adequately covers jewelry and also offers the client a competitive price.
Downsides of the PAF with the HO Insurer
A stand-alone jewelry policy (personal articles floater—PAF) addresses the jewelry need by offering broader coverage, including covering “mysterious disappearance." And most floaters have higher limits than the typical HO policy has.
However, if the standalone policy is with an insurer that reports to CLUE and PILR, as most HO insurers do, losses covered by the PAF will be included as part of the company's aggregate loss report. Jewelry claims can still impact the HO policy.
Just as auto experience can impact account rating, jewelry claims can be an unpleasant surprise. Check with your carriers to see if jewelry losses count against the client's HO experience. If they say “No," get that in writing!
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. Far from being more costly, this solution means savings to the client, because such jewelry policies are quite competitive in price. Some insurers even offer premium discounts not available on homeowner coverage. In the event of jewelry loss, the loss won't affect the homeowner policy and the client's claim-free status.
A word of caution: Not all standalone jewelry policies offer a cash settlement option; they offer only a repair-and-replace option. This could have devastating consequences for the agent, even if the agent had only recommended the insurer. Not informing the client that a carrier offers only repair-or-replace settlements (no cash) could leave the agent open to an errors and omissions (E&O) problem. Even short of such an extreme consequence, a dissatisfied client at claim time can retaliate by taking all their business elsewhere.
Keeping Your Client's Business
Jewelry is usually a low-premium item, $50-$100. Some agents don't want to bother with it and simply refer their insured elsewhere for jewelry coverage. A good reason to avoid a referral for jewelry is that some insurers specializing in jewelry insurance cross-sell all kinds of insurance through affiliated companies. This means that any insured you refer to such a company for a jewelry policy could be cross-sold for all their other coverage as well – auto, homeowners, business insurance, you name it. 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 emotional 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.
Dave Hendry is the founder and CEO of JCRS Inland Marine Solutions. He wrote two books: The Jewelry Inventory and Sales Classification Manual and Jewelry Insurance: The Underwriting and Claims Reference Manual.
You can reach him at the link above.
Last Updated: December 2, 2022