Owners of high value jewels or art collections could well be underinsured, a situation that could put them significantly out of pocket should the worst happen, with complacency following the economic downturn one of the main reasons for the lack of adequate protection, according to Mark Richards, who runs the specialist private-client unit at insurance brokerage Bruce Stevenson.
While the financial crisis and its fallout may have hit general spending, many people in Scotland, and indeed across the UK, have continued to acquire valuable items, keeping prices buoyant. We have all read about luxury brands doing particularly well during the last several years as the spending habits of the wealthy appears to be unaffected by turmoil in the financial world. The uncertainty in relation to conventional investments such as equities and bonds also meant high-net-worth individuals spent more in the past five years on goods perceived as holding their value – jewellery, especially anything containing gold or precious stones, and art such as works by old masters. With an upturn in the economy now in sight, that’s driving prices higher for the trappings of luxury, Richards says.
Richards’ position at the company is a sign of Bruce Stevenson’s commitment to being the leader in serving high-net-worth clients, as well as providing insurance solutions across the renewables, property, farms & estates, risk management, SME / Commercial and Social Housing sectors, in Scotland. His expertise stretches across the full range of fine art, jewellery, antiques and heritage property, having previously been managing director of the Scottish business of auctioneers Bonhams. If anyone in Scotland is going to know about trends in art or jewellery, it’s likely to be him.
“Assuming that the value of everything went down in the crash is mistaken, and in some of the markets that we deal with it’s almost as if the financial crash never happened at all.” Richards says. “But many people think there’s been a decline and haven’t increased their insurance for more than a decade. As a result, they’re left exposed should damage or theft occur to an item that is very important to them.”
In fact, the importance of a precious object is not always immediately appreciated by an owner, especially if that item wasn’t acquired directly and was handed down through the family or gifted by a loved one. Many individuals cite “sentimental value” as a reason not to insure an object because they believe it’s irreplaceable. That’s a big mistake, according to Richards, due to a misconception about the source of most insurance claims coming from total damage, not from the all-too-regular partial damage to a work of art or item of value.
The result is that you may not be able to afford the many thousands of pounds needed to repair something. And a damaged painting can’t be displayed, nor a broken necklace worn, and without repair the item is as good as worthless.
“Everyone talks about the possibility of the house burning down and the artworks with it, but in most case it’s not about that,” Richards says. “It’s about major partial damage as a result of an accident for example your daughter breaking your diamond earrings as she dresses up with friends or a burst pipe soaks your antique desk. In all of these cases, the restoration is going to cost a lot of money.”
Obviously insurance in this area is quite a specialised interest – not something that the price-driven insurance websites would really cater for – and Bruce Stevenson prides itself on the expertise and advice it’s able to hand onto clients. Taking art for example, there are a few key things to remember:
The most important, according to Richards, is that insuring a painting isn’t necessarily terribly expensive. It is cheaper than insuring general house contents. In fact if with the right insurer it should be cheaper to insure a £5,000 painting than an equivalently expensive television, it is a television, for the simple reason that most thefts occur in order to generate cash. Those breaking into a house also tend to know that an artwork is likely to be one-off and traceable to the owner, linking them to the crime scene.
Another important consideration to keeping your insurance premiums down is think beyond the obvious when approaching the insurance of fine art. Bruce Stevenson works with clients to make sure that they insure the object for the right price, which sometimes need not be the full retail replacement value but another lower basis for replacement or cover just restoration costs. With the right counsel and insurance company, a client won’t get penalised for partially insuring an object.
“It’s all about personal service, building relationships and getting to know our clients very well and what they need,” Richards says. “That way, we can help them keep their premiums manageable possible while making sure they are very well covered.”
If artwork rarely tends to go missing, unfortunately the same cannot be said of jewellery. While the painting or antique chair stays in the house, jewellery tends to go walkabout with its owners, and can often get left behind in a hotel or restaurant, or just fall off. Not only that, it’s beautiful and the sparkles are on full display for any opportunistic villain. Diamonds and gold have been rising in value, partly due to soaring commodity prices driven by the boom in Asia, but also because of the wealth coming into the UK from emerging regions. The replacement value for jewellery, and indeed artworks and antiques, is determined by global rather than local demand and therefore it is quite likely that people will not know just how much the value of what they own has soared in recent years.
Mark Richards concludes: “You can’t expect people to keep an eye on global markets so it’s up to us as their broker to make sure our clients are properly insured. If you don’t have the right policy you may well end up very disappointed should you lose an item or see it damaged and not be able to replace or repair it.”