RAPAPORT... Many retailers and wholesale jewelers rely on jeweler’s block insurance to cover losses such as robbery, theft, fire and other risks. While insurance is necessary, no one likes to overpay.
RDR talked to leading professionals in the field for tips on how to keep costs down.
Currently, crime in the diamond and jewelry industry appears to be on the increase. A quick survey of recent news stories on diamonds.net included the following headlines: “Four Sought in Mappins Jewelry Robbery,” “Shooting Deaths Investigation Centers on Midwest Grillz and Jewelry Store,” “Robber Takes $4 Million in Diamonds from Florida Jewelry Store,” “Former Employee of Shreve, Crump & Low Faces Larceny Charges.” The right protection against such risks is critical.
“The best method to keep the jeweler’s block insurance premium at its lowest level is to have a claims-free record for more than five years. A claims-free record should also result in a 10 percent no-claim bonus, which can further reduce the renewal premiums,” states Michael DeRocckis, Sr., senior underwriter and president of MDR Agency, Inc., a managing general agency (MGA) for XL Capital.
“The underwriter, in theory, should reward you for not having claims. Everybody benefits from that,” remarks Gary Wasserman, president of Wasserman & Wexler, vice president of Wexler Insurance and owner of IJB insurance.
Keep Training
Minimizing loss claims involves minimizing risk, and insurers are more than eager to help their clients learn how to do that. “The number one thing we recommend is to have continued loss prevention meetings and discussions. Ongoing training is key,” says Jeff Mills, vice president of commercial lines operations at Jewelers Mutual. His firm recently published safety tips for retailers and its website, jewelersmutual.com, offers video training on the topic.
Scott Sellick, underwriter at XL Insurance’s Syndicate 1209 at Lloyd’s of London, explains that a visit to your premises by an underwriter allows him or her to identify and evaluate “physical and procedural practices” that can influence rates. The underwriter can suggest improvements that can minimize risks and lower rates.
Both Lloyd’s of London and Jewelers Mutual report that the most severe losses in the industry are the result of armed robbery. Jewelers Mutual encourages its clients to monitor the Jewelers Security Alliance’s (JSA) crime activity website, www.jewelerssecurity.org, as part of an overall security plan.
Consider Deductibles
Mills says that the concept of risk transfer is key to making informed choices. “When you are buying insurance, you are transferring your risk to an insurance company in exchange for a premium. You can raise the floor — raise your deductible. Or you can lower the ceiling — perhaps you don’t need as much insurance at the top end or maybe you can reduce your inventory.”
DeRocckis concurs. “A higher deductible could be helpful. Most diamond dealers and jewelers are purchasing ‘catastrophe insurance.’ Therefore, if the normal $2,500 to $5,000 deductible were increased to $10,000 or higher, this could result in an additional savings of anywhere from 5 to 20 percent.”
The most frequent type of jeweler’s block loss is shipping loss, according to Mills. He advises seeking out the best value for this coverage under your plan. “Jewelers Mutual provides $100,000 of free coverage for registered U.S. mail and $25,000 for U.S. express mail. U.S. mail is a better value than Federal Express or UPS, which are at a premium,” he noted.
Jeweler-On-Jeweler Crime
Jewelers Mutual has also noticed an increase in what the company calls “jeweler-on-jeweler crimes,” such as memo goods not being returned, insolvencies and “bust-out schemes” — when a company’s identity is taken over to obtain credit. “We highly recommend Jewelers Board of Trade (JBT) and credit checks,” stresses Mills.
The most expensive feature of a jeweler’s block policy is the travel coverage, DeRocckis points out. “We all recognize the role of the jewelry salesperson. Obviously, the values carried play a significant role in the rate structure. I believe that the nature of stock is significant. For example, the salesperson carrying finished jewelry, which is bulky by nature, on a dolly, in and out of a retail establishment, presents a greater hazard than the diamond dealer or salesperson carrying loose diamonds on his body in a vest, diamond wallet or belt. These factors should all be considered,” he attests.
“If you have a lot of salespeople on the road every day of the week, that’s going to bring your premium up. Cut down on days, as well as the limit they are traveling with, and it will have a profound effect on your premium,” Wasserman specifies.
Another important factor is the financial stability of the firm from which you are purchasing insurance. “The insured often fail to investigate the strength of the capital behind their insurer. There is no sense in having cheap insurance from a company in a third-world country if the insured finds out that there are clauses that limit coverage or the insurer is unable to handle a large loss” because it is financially undercapitalized, stresses Joseph Dowd, president of Berkley Asset Protection Underwriters.
Soft Market
Some in the insurance industry anticipate rate increases in the future. “Jeweler’s block has only been profitable for a limited number of firms in the U.S. segment. A lot of it is actually underpriced. It is a very soft insurance market out there right now and rates do need to go up,” Dowd contends.
“I firmly believe that an established relationship with the underwriter — maintaining loyalty, credibility and a mutually beneficial relationship — will go a long way in meeting the objective of reduced premiums,” DeRocckis concludes.
Top Five Ways to Cut Your Jeweler’s Block Premium
• Maintain a claims-free record for at least five years, reinforced via ongoing loss prevention training and practices.
• Increase your deductible or reduce your inventory.
• Reduce the number of salespeople on the road, the number of days they travel and the amount of goods they carry.
• Identify, in consultation with your underwriter or agent, which alarms and other physical features might lower your risk assessment.
• Establish a long-term relationship with your underwriter and communicate your needs.
• He or she is best equipped to help you with the specifics of your policy.
Article from the Rapaport Magazine - February 2009. To subscribe click here.