Marsh UK has issued a warning to retail jewelers to review their risk management and security practices ahead of the 2010 insurance renewal season, or risk facing sizeable increases in their premiums next year.
Marsh said its “advice follows a spate of well-documented losses in the diamond and jewelry market this year, ranging from ‘stone-switching’ and fraudulent valuations to high-value robberies. In addition, the market has also experienced a downturn in the wholesale value of certain classes of diamonds and precious stones, in conjunction with a drop in consumer demand.”
Jonathan Ballard, a Vice President in the Specie Practice of Marsh, explained: “Sophisticated crime syndicates are taking advantage of the current security procedures in the high-end retail sector, which are often weighted more towards creating a more positive customer experience than the overall protection of the products. For example, many high-end stores have their inventories freely available on the internet, or potential customers are able to just walk in off the street.
“As a result of the number of high-profile losses this year, and a general view that the moral hazard risk is increasing, insurers will be examining their risk portfolios and claims trends more closely in 2010. Companies that are perceived to be failing in managing their risks effectively, or have suffered a loss, are more likely to have a tougher time at renewal.
“However, by working with their insurance broker and demonstrating that they have taken practical measures to improve their risk management and security, companies may still have a more favorable renewal experience.”
Marsh listed some “simple measures” it recommends high-end retailers take to enhance their security, as follows:
– Using a more secure system of access to and from the premises
– Having fewer high-value pieces on regular display
– Where possible, implementing an appointment-only system for high net worth individuals
Marsh also recommends that retailers, regardless of size, undertake regular security surveys to pinpoint weaknesses in their current security measures and identify areas where it needs to be enhanced.
“Security surveys should be carried out on a regular basis. Crime syndicates have proven to be more sophisticated in recent times and as such the recommendations of the security survey may be altered to reflect changes in the underworld’s modus operandi,” Ballard added
“Good communication among the insureds, insurer and broker is essential in these testing times to ensure that firms stay ahead of the criminals’ game, maintain stability and gain peace of mind.”