Cost of insurance for jewellery store is skyrocketing. Consequently, many stores are cutting corners by not displaying high-value pieces and pruning the risk coverage. I understand many stores are doing either of these or both. It is indeed is a bad business practice to lay your business exposed to risks that are not properly assessed or adequately covered. Here are few guidelines as to how you should manage your jewellery store insurance smartly:
1. Firstly, you must ascertain the types of risks you are going to face regularly. Uncommon and irregular risks need not be insured. But at the same time you have to identify related risks and cover these well. One example is the general liability coverage. Jewellery stores attract customers, passers-by, enthusiasts and so on, who could be exposed to the risk of accidents within the store, or simply the sales person knocks one of the visitors down involuntarily. In addition to general liability, you should cover risks of burglary, fire, theft, loss, damage and civic commotion
2. Secondly, you must spell out what items are to be covered for insurance purposes. Originally there was point-of sales insurance policy that covered the store only. For example block coverage is generally resorted to get all inventories in display and in strong room. However, due to movement of stock taking place to and fro the store frequently additional risks are being listed. One such risk is stock-in-transit that is necessary when you are moving inventory between factory and store. Additionally pieces sent on delivery must be covered until these reach the desired destination. Yet another grey area is jewellery taken out for promotion or exhibition. These should not be left uncovered. Many stores fail to cover memo goods that are obtained on consignment basis. Note that you are responsible for the consignor for the goods be it sold or lost. Most jewellery stores experience hefty peak-season sales. In that event this aspect must also be brought in as risk. Miscellaneous covers including damages to workmanship or gems and diamonds set in jewellery also merit attention
3. While completing the insurance proposal you must list all items that are displayed or kept in strong safes. Some stores attempt to reduce insurance cost by not declaring the pieces and their value. A full content insurance policy is not only necessary for valuation purposes but acts as a safeguard for settlement in the event of a claim is made under that insurance policy
4. Concomitant to the above is the basis of valuation that a store makes when completing policy proposal or claim. You can select one of the three methods of valuation. One relates to the installed value of jewellery at cost without adding the profit margin. This method is suitable where the store sells mass-market items. Replacement value, as a method is chosen when you sell designer wear similarly branded items must be ensured at the market value only
5. Quite a number of issues flare up in the case of valuation of jewellery. As you agree with me valuing jewellery is more of an art than science, due to unique aspects surrounding the pieces including design, craftsmanship, limited edition, collection title and process of fabrication. Different parties value jewellery in varying manner. Professional appraisers do not bother much about aspects that I have outlined. Instead they look at the price of metal and the value of gems, diamonds or pearls set on the jewellery piece. One reason for this lack of appreciation of finer points is that mot appraises are gemmologists and not jewellers. Neither the jewellers can come with a standard valuation acceptable to the insurance companies. Most of them adopt a thumb-rule: cherry pick the market price and add to it what they think the jewellery is worth and divide the sum by 2 to get the right value. Some jewellers do take the value of the market and theirs and pitch on whichever is higher. There is no need to labour on the point any more. Suffice is to say that jewellers have go on improving their valuation techniques
6. Apart from understanding risks and covering these, jewellers must do more homework in minimizing risks within the store. One way to manage risk is to display fewer high-valued items as done in malls in Malaysia. A proven method is to install proper system of recording incoming and outgoing inventory along with proper surveillance system overseeing the removing and replacing of jewellery pieces from display racks and strong safes. Finally, security operations of entry and exit points of the store must be tested, really.
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