Tag Archives: underinsurance

Out of the Closet – are your clothes insured adequately?

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As a general valuer, I still find it remarkable that the most shut off and private room of the house, is usually the one that hides the biggest mistakes, faux pas, successes, lucky finds – and ultimately valuable items in the property.

The humble wardrobe has for years been the item that comes last in a hierarchy of importance throughout the home – after paintings, sculpture and antiques it would almost seem vulgar to add up those collections of cashmere jumpers and boxed sets of Agent Provocateur underwear that you haven’t quite found the right time for.


So why is the wardrobe often overlooked? One could argue that accumulation plays a big part in this – if a client spends £2000 on a coat, would they contact their broker? Maybe not, but after five years of a new winter warmer every year, that figure starts to rise rapidly…also clothing just being a functional item went out in The Stone Age, clothes have been about style, exclusivity, and quality for centuries and that has created a fairly modern phenomenon – the clothes collector.

Whilst we all have items in the closet that hardly ever get used (for me it is a pair of trainers, used exclusively from January 1st – 7th annually, and a rather ill-advised pale blue suit bought for a garden party in the mid noughties) there are clients of mine that seasonally will spend over £100,000 on clothing and it will only be worn once or twice – this isn’t unusual, and strangely it seems to be becoming more common.

If you haven’t read my previous article on Birkin handbags, please do – it will give you an insight into this fascinating subject and go some distance to explaining why these items receive so much attention and earth-shattering prices. Shoes for many people fall into a similar category of not just simple things that you purchase and wear, but footwear that is lusted after, desired, and envied.

With all of these things considered, does that mean that every HNW client has £1,000,000 of clothing – no, but what it does mean is that a lot of these clients have not considered that the suit they had made at Henry Poole will no longer cost them £2,000, and that pair of Ferragamo’s may have even doubled since they bought them before that cruise, even a simple pair of jeans is almost £100 these days, and I wonder how many people have factored in swimwear or scarves?

What is very clear is that today’s collectables can be displayed, or worn and they all can still change value at an astonishing rate and need to be reviewed regularly. One of my current favourite trends is the astonishing market for rare basketball sneakers (that’s trainers in English) where the secondary market surpasses even Rolex for the biggest increase in value as soon as they walk, or at least are carried out of the shop.

Whilst a valuer cannot go through every drawer in a dressing room, it’s important to establish the client’s taste and style. Getting to know the client and their spending habits is vital to an accurate valuation – that and a keen eye for a pair of Gucci loafers…

Is it Time to Update Your Jewellery Insurance Valuation?

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A pair of platinum and diamond ‘Victoria’ ear studs

We have chosen four items of jewellery from four of the top manufacturing brands – items that have been in production virtually unchanged for nearly 20 years – unchanged that is except for the price to demonstrate how important a regular jewellery insurance valuation is!

The price of gold in 2003 was about $450 per ounce and it’s about $1510 per ounce today having peaked around 2012 at $1750 per ounce – so the roughly 350% rise in bullion price over the period in question is a price increase factor but a surprisingly small one in gem set pieces like these. The Cartier ring is quite a chunky piece, but its basic bullion value today is probably about £400 as opposed to approximately £125 in 2003. OK, the VAT rate has risen from 17.5% to 20% in the same period but again that’s had a pretty small effect on the retail price, so that leaves gem stone prices, manufacturing costs and retail profit mark ups as the main ‘culprits’ for the 2.5/3 times price increases.


Van Cleef and Arpels.

An 18 carat yellow gold and mother o’pearl 20 motif Vintage Alhambra necklace.
2004 £6,210
2012 £10,800
2021 £13,700

Diamond prices for good commercial grade stones which these top manufacturing brands would use have largely stalled over the past few years; it’s only the highest quality and rare coloured stones which hit the headlines with their huge prices. And we’re all waiting to see what the effect on retail prices will be when the full impact of the introduction of synthetic diamonds is felt. Also to be taken into account is the effect that internet has had on diamond prices. There are numerous well-established and reliable web sites making available to all millions of unmounted stones at basically ‘trade prices’ (plus VAT) and most with recognised laboratory certificates. The ‘closed shop’ trade only which has prevailed in the jewellery business for centuries is breaking down. The coloured stone market is swamped with cheap, very heavily treated and colour enhanced rubies, sapphires and emeralds that come mainly from the Far East. Another factor is the huge increase in the use of coloured stones that 20 years ago would have been classified as ‘semi-precious’ but are now appearing at serious stone prices. The stones that have shown a huge increase in price over the past 10 or so years have been natural untreated sapphires, rubies and emeralds – but the stones have to have an independent laboratory certificate stating they are natural colour and untreated to come in to this category. A few exceptional stones of this type – mainly in pretty 1920/1940’s period pieces – have fetched more per carat than decent comparable size commercial grade diamonds.


Cartier.

An 18 carat white gold, diamond and emerald Panthere ring
2003 £26,000
2010 £42,100
2021 £73,500

Manufacturing and jewellery workshop costs in Europe have certainly risen sharply over the past 20 years – as anyone who has had to have jewellery items repaired will know. Nearly all items are still hand made or finished so the cost of making up of jewellery is a big factor in the resulting retail price. The exception to this being the type of items available from online sites and lower grade retailers that are mass produced in the Far and Middle East – usually pretty poor-quality workmanship and poor-coloured stones. The second-hand and auction market for jewellery of this type is very weak – so don’t expect to cover the cost of your Far Eastern travels if you try to sell your purchases back in the UK.

Chopard.

A pair of 18 carat white gold and diamond ‘Happy Diamond’ drop earrings.
2003 £1,875
2011 £3,120
2021 £4,290

Profit marks up are a big variable – about 30 years ago when I was first involved with jewellery the tacitly accepted mark-up was to double the cost price and add VAT. Now, for a retail shop mark-up can be a whopping 300% to 350% plus VAT. But don’t be too harsh on the retailer – he has frightening fixed overheads and outgoings, and jewellery can be slow moving stock. Also, some jewellery and watch manufacturers do dictate a fixed retail price to the shop for their products. But it’s always worth a little haggle!!

Tiffany.

A pair of platinum and diamond ‘Victoria’ ear studs
2003 £3,100
2010 £4,925
2021 £8,775

If you had bought any of the four illustrated items back in the very early 2000’s at these prices and had applied an across the board annual percentage increase to cover insurance you might well have ended up in trouble in the event of a claim due to the variable cost factor increases. We recommend a review of a jewellery insurance valuation every 3 years. A desktop revaluation is fully acceptable within this timeframe, but a complete revaluation at 5 years especially as the valuation would include a close examination of the condition of claws, clasps and links, is something more and more insurers and brokers now insist on.

I’m afraid I must end on a cautionary few lines. Most of the big brand names like the ones above suffer from faking and copying. Allegedly more Van Cleef and Arpels Alhambra jewellery has been made in the Middle and Far East than in France!!. All the brands we have illustrated are meticulous in their marking and all their products will have a brand name and in most cases also reference and individual serial numbers, so if you’re shopping for some big name goodies on your Eastern travels be sure to take a good magnifying glass with you!

The Importance of Keeping Your Values Up to Date and How to Avoid Under Insurance

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Over my 28 years working in the Private Client industry working for specialist insurers, and consulting in the High Net Worth (HNW) space, I have seen numerous cases of inadequate cover. Incredibly up to 75-80% of HNW homes are estimated to be underinsured (Datamonitor report 2015).

I recall going with a broker to see one of their clients in London to review the value of their contents and valuables. The client’s wife casually enquired what the general contents were covered for and I’ll never forget her response when she was informed of the amount … ‘darling, that wouldn’t even cover my handbags’ – which incidentally were ‘serviced’ annually in New York. The sums insured were subsequently reviewed and there was a more than threefold increase in cover.

In another example, following an unfortunate fire at a substantial home, the total contents cover was almost exhausted in one room where the curtains alone were worth £70,000. They were completely damaged by smoke, rather than the fire itself. Whilst the insurer was sympathetic to the client’s position, they had not received adequate premium as the sums insured were hugely understated, and the insurer asked the client to pay backdated premium for the correct sums insured. The broker involved was grateful for the insurers approach, although had not spotted the degree of under insurance.

Why are HNW homes more at risk from underinsurance?

Value of certain items increase over the years such as jewellery, art and even wine.
Items made of precious metals and valuable stones are highly influenced by fluctuating markets, which can lead to significant increases.

Bill Baker of Porticus Insurance Consultants Ltd, a specialist HNW broker based in London commented on his experience:
‘We recommend that our clients’ jewellery is valued every 2-3 years to avoid under-insurance. We know many are not properly covered and when they do have a new valuation, we see very significant uplifts in values. We also regularly see under-insurance of contents in the high net worth sector. The replacement costs of contents in a typical detached family home can easily be £250,000 or significantly more depending on the quantity and quality of clothes, shoes, handbags, carpets, curtains, sports equipment and furniture’.

So how do insurers deal with under insurance at the time of a claim?

HNW insurers stipulate in their policy terms that items of contents and valuables need to be insured for their full value, and their adequacy will be reviewed at the time of a claim. If the amount is not adequate, they will require as a minimum that the sums insured be revised, and the correct premium collected. At worst they can potentially void the policy if there is deliberate misrepresentation, and or non-disclosure.

These insurers often individually list on the policy items over a certain value for jewellery, art and precious metals, and then cover them on an ‘agreed value’ basis. At a time of loss, the insurer will pay out the amount on the schedule, although not a higher amount if the item costs more to replace, which can be the case if the item has not been recently valued.
Most non-HNW insurers will apply average, where the amount paid out is proportional to the amount underinsured, so if the underinsurance amount is 50% for example, then only 50% of the claimed amount will be paid.


How to avoid underinsurance:

  • Have a professional assessment by a specialist valuer such as Doerr Dallas Valuations, to keep the values of your contents and precious items current. They offer an initial walk through valuation for £500 plus VAT, which will highlight any underinsurance on contents, as well as comment on the adequacy of jewellery cover. If there is significant underinsurance a full valuation will be recommended
  • Review your sums insured on a regular basis, considering movement in prices, for example the recent increase in gold prices
  • Undertake a full review of your home contents, including carpets and curtains, clothing and shoes, sports equipment, and items kept in cupboards, garages and garden rooms
  • Speak to a specialist HNW broker, who will offer you independent professional advice about how to protect your valuable assets, and recommend a suitable insurance policy for your needs

Does Your Current Insurance Reflect Art Market Increases?

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Yayoi Kusama –
KOKORO (Heart), 1988

We asked our Head of Contemporary Art, Ben Hanly, to look at how values have changed over the past few years to illustrate just how important it is to have the value of your collection updated regularly. We think you will be shocked by the results!


David Hockney (British, 1937)
Pool Made with Paper and Blue Ink for Book, 1988
Lithograph, edition of 1,000
26.5cm x 22.5cm

2015 – £10,000

Now – £25,000


Yayoi Kusama (Japanese, 1929)
KOKORO (Heart), 1988
Acrylic on canvas
65cm x 53cm

2006 – £45,000

Now – £225,000


Andy Warhol (American, 1928-1987)
Marilyn (no. 31)
Screen-print, edition of 250
91.4cm x 91.4cm

2015 – £175,000

Now – £300,000


Banksy (British, 1974)
Girl with Balloon, 2003
Spray-paint and stencil on canvas, edition of 25
40.5cm x 40.5cm

2015 – £175,000

Now – £600,000

To speak to us about an art valuation call us on 01883 722736 or email [email protected]

 

Are you correctly insured? The importance of having your contents correctly valued

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Sean McIlroy, Senior Valuer

How much do you insure my contents for?   This is a question asked to all clients by their broker or insurance company.  It’s also the hardest question for clients to answer.
Under-insurance is a huge problem in the industry.  A recent analysis of a sample of Walk Through Validation reports completed by Doerr Valuations, revealed high levels of underinsurance, particularly in the categories of fine art, jewellery and watches. 73% of the clients were under-insured by at least 36% and many, by as much as 50%. The answer to solving this problem is to undertake a Walk Through Validation (WTV) or a Full Valuation.
A WTV is an independent contents survey provided to appropriate clients which includes the general contents, fine art and jewellery assessment. Its aim is to ensure the correct levels of cover are in place and advise if a full valuation is needed.
The process for a WTV takes around two hours beginning with a discussion with the client about their current sums insured and how these figures were arrived at.  There is also a conversation about where and how items would be replaced in the case of a claim, whether it be at an Interior Designer, Harrods, John Lewis or Ikea.  No one assessment is the same, every client is different.   It’s very important to understand the clients buying habits to enable us to provide a value.  Every area of the contents is covered, including the replacement of your wardrobe contents, shoes and handbags, outdoor items and outbuildings.
The survey is a room by room, category by category break down of the contents where a senior valuer attends.  At the end of the WTV the figures are added together in their correct categories and totalled.  The senior valuer then discusses the findings and agrees them with the client.
In many cases high net worth clients may have specialist collections.  This may be in Contemporary Art, Jewellery, Watches, Silver, Porcelain or even Handbags.  If this is the case the survey would recommend a full valuation for a particular category by one of our relevant specialists.  This ensures that the sums covered are accurate.
The survey will include values and photographs of high value items and a photograph of the property and general room shots.  A section on security including confirmation of alarm systems, locks, safes etc, is also included.

The benefits of a WTV are many.

For the client, the contents sums insured are accurate and independently verified so they give piece of mind for the client and the broker can feel confident that they have done all that they can to make sure their clients are correctly insured.

For the underwriters, they will know the sums insured are correct and independently verified thus easing any claims process that may arise should the client suffer a loss.

For the cost of approximately £500 which may well be less than your Policy excess, it’s a win, win situation for clients, brokers and insurance companies alike.

When properly insured, should you suffer a loss you can be confident that the settlement you will receive from your insurer will replace the contents of your home for you and your family.