Many jewellers rely for an important part of their turnover on selling replacement items for jewellery lost in burglaries. As a result they are prepared to offer substantial discounts on normal prices when insurers settle with them direct.
The arrangement has historically suited both sides. Insurers pay out less in claims while jewellers ensure that money from claims is reinvested in their goods rather than used, say, to pay for a new car or a skiing holiday.
However, for the system to work it also needs the participation of the person making the insurance claim. The problem is that they have the least to gain from it.
When Janet Blain's family home in the North of England was burgled last year she lost jewellery that she had insured for pounds 3,300.
Her policy, arranged through a building society, was with the troubled firm Municipal Mutual, which offered her the opportunity to buy new items to this value at a local jewellers.
'But they told me that if I chose to take a cash alternative they would pay 10 per cent less,' Mrs Blain says. 'Most of my jewellery had been my grandmother's, and none of it was replaceable. I don't like modern jewellery, and anyway you don't just go and buy jewellery like you do a TV or video.'
Mrs Blain decided she had no option but to forego pounds 330 and take the cash. Pam Green (a pseudonym) made a similar decision when she had to make an insurance claim for her pounds 900 engagement ring and other family jewellery lost in a burglary.
Her insurers also deducted 10 per cent, telling her that this represented the money they would be able to save. She says: 'It just seems wrong. I don't like the principle. The ring was an expensive item and I wanted the option of choosing where to replace it.'
In one respect, Janet Blain and Pam Green were fortunate that their insurers at least offered a cash alternative. Not all do so automatically. Contrary to what many people believe, insurers can meet their obligations by replacing items rather than paying cash value. Cash is simply a more convenient way to settle many claims.
The question hinges around what is meant by replacement. The legal issue, perhaps, might be whether modern jewellery to the same value as older or antique jewellery could be adequately described as replacing it. In practice, anyone dissatisfied with an insurance company offer can attempt to negotiate a better arrangement - for example, an opportunity to shop around between various jewellery shops.
Failing that, and providing the insurance company participates in the scheme, the next step could be to take a complaint to the Insurance Ombudsman.
The ombudsman, Dr Julian Farrand, has not considered a case directly comparable to Janet Blain's and Pam Green's. However, in a motor insurance dispute two years ago, he ruled that an insurer offering to replace written- off cars with new ones should also make a cash alternative available to policyholders, but only to the extent of the actual cost to the company of the replacement cars.
If a similar principle applies to jewellery claims, policyholders may soon find that the cash alternative they are offered will be worth even less. The combination of high crime rates and poor retail trading mean that insurers' discounts are frequently well above 10 per cent.
'Discounts are getting higher. Retailers are hungry for business,' says Jonathan Brown, of the National Association of Goldsmiths, the jewellery shops' trade association. 'I don't know if our members are too happy about insurance companies doing it.'
Stuart Wartalski, marketing director of Endsleigh Insurance, says: 'What we are seeing are discounts of 20 to 30 per cent in certain areas where there is a high incidence of theft.
'Discounts can be as high as 30 per cent because of the volume of replacement business.'
If policyholders want to ensure that any future jewellery claims they make are treated sympathetically, it is obviously sensible to have proper valuations for the items. Photographs are also a wise precaution, and will soon have an additional advantage.
Later this year Scotland Yard's arts and antiques squad will be launching a database that will be able to hold scanned photographic images of stolen objects for help in returning recovered items to their owners.
Meanwhile, if you do decide to take the cash alternative offered by your insurer, you may not necessarily end up out of pocket if you follow Pam Green's example.
When she eventually found a replacement ring she wanted, she explained the circumstances to the jeweller and promptly negotiated her own 10 per cent discount.
When it comes to bartering, it seems, we can all have a go.
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