I am a retail jeweller and am fed up with the insurance companies practice of forcing their policyholders to replace their goods only from Samuels etc.

I am preparing a fact sheet for my customers clarification relating to insurance claims for loss or damage to property. Having drafted the following, I would like to specify any law that can support this view. In particular whether a customer can pay £1 deposit for an item they have chosen to replace their lost item. Then make their insurance claim and insist that they have already made a legally binding contract with the jeweller to supply the goods and whether the insurance company have to abide by that wish and not force the customer to go to Samuels for instance , so they get a huge discount.

Comments welcome.

Over the past twenty years or so, most insurance companies have one by one, closed their in house claims departments. They have replaced their systems by either sending policyholders claims to a Claims Assessing Company, or by insisting that any replacement goods are only purchased from certain multiple retail jewellers.

The insurance companies values of policyholders losses are assessed by the insurance companies preferred retailer, or by one of the claims assessing companies. These companies then issue either a voucher that can only be redeemed at say, Samuels, or Goldsmiths.

Alternatively, settlement of the policyholders claim may be handled by The Loss Management Group. This claims assessing company will arrive at the value of the lost goods and issue a ‘credit card’ loaded with the funds equal to your claim less excess. This card can then be spent at any jeweller in the UK as long as that jeweller is on their list.

Imagine, many thousands of policyholders claims all being referred to Samuels. How much would Samuels agree to give to the insurance company for those customers who have no other choice but to buy from them? Its about 30%. Suddenly we see ‘whats in it’ for the insurance company. A £1000 claim for a lost ring might only cost the insurance company £700 if they tie-up with a particular jeweller.

Or, what if the insurance company tie-up with The Loss Management Group to handle the claim? The LMG are working for the insurance company, it is therefore in the LMGs best interest to make sure they save their client insurance company, a whole lot of money. The best way to do that is to make sure the values of the claims are as low as possible. Might they for instance imply that the diamond you bought from Bond Street for £1000 (but lost the receipt) could be replaced at Samuels for £600 and so value your lost ring with a £600 settlement. You then get your ‘credit card’ and spend your £600 with anyone on the list. That jeweller then gives 25% discount to the LMG. The insurance company pay the LMG £450. You have a replacement item and may just about be happy enough. They have made a massive saving at the expense of you being forced to use a jeweller on their list.

It is this compulsion that the Financial Ombusdman has questioned. The forcing of the policyholder (against their wishes) to use particular retailers. Thereby not allowing the policyholder to make their own choice to use a jeweller in their home town with whom they may already have a relationship of trust.

The Financial Services Ombudsman ruled that it was wrong for people to be directed and forced to shop against their wishes at a particular retailer for goods that are being replaced under their insurance policy.

If an insurance company does try to insist the policyholder shops at a particular retailer, the customer can quote the Ombudsman’s ruling that this is a denial of true indemnity. “The option to replace jewellery is not properly exercised by offering a policyholder an authority to buy jewellery up to an agreed value at a particular jeweller’s shop. That is wrong in principle, although it seems to have become a hallowed practice. It is, in fact, a denial of true indemnity”

Consumers who have difficulties obtaining the authorisation from their insurers to use a jeweller of their (the consumers) choice, can now exercise their right to choose.

The same of course would apply to any consumer goods. So, please, can anybody help me to support my reasoning and to allow my customers to be able to buy my goods if they want and not be forced to Samuels.

I say this because I had a beautiful cameo shell and allowed a good friend to buy it. We made a handmade mount in gold and it was lovely, one of a kind. She lost it. And being too embarassed to let me know, she was forced to go to Samuels to replace her goods. They dont even sell cameo brooches.

As you point out, insurers are not entitled to insist that replacement jewelry is only sourced from particular suppliers.

They are not even entitled to require that the lost item is replaced. The insurers obligtion is to pay the agreed value to the insured person.

If you are preparing a fact sheet, we would be pleased to carry it o this forum

Remember though that it is not a totally straightforward issue.

The rights and obligations of the insured have to be balanced against those of the insurer. The principles of indemnity and mitigation still apply, and any action taken must be reasonable.

Yes. But reasonable first to the insured. The issues I want to examine (further to the FOS ruling). Insurers will not issue cash settlements if they can help it, but insist on the insured replacing their goods. They then receive a huge discount. Although their old practise is outlawed, they still insist that the policyholder goes to the insurance companies preferred jeweller for replacement. (they hope the poilicyholder is unaware of their right to refuse).

The question I want to answer is: Assuming the policyholder finds the replacement item (either exact model) or one of the same value, from any jeweller they choose and they pay a £1.00 deposit for that item whilst the claim is being processed, does that deposit form a contract that forces the insurance company to accept that the insurance company can no longer suggest (by issueing a voucher or card) that the policyholder must only buy from a jeweller on their list?

Or, if the policyholder receives the 'loaded credit card' and spends a portion of it with a jeweller on the list, but then finds a piece of jewellery from another jeweller (not on the list), can the policyholder then spend the balnce of the settlement with that new jeweller? Or has the policyholder accepted the offer/process of settlement via loaded credit card once they have spent any portion of it, and therefore becomes committed to spending the whole of it with the jewellers on the list?

I am hoping that we can accuratly tell any customer that they are free to buy from the jeweller of their choice (FOS have thus ruled) AND that by placing a deposit on that item, it binds the insurance company too, before the policyholder unwittingly has accepted a voucher or loaded credit card.

Any more ideas on the principle of accepting a deposit from the insured to form a binding contract that the insurance company will have to accept.

Please note that Insurance Companies have already countered this issue by allowing claims to be cash settled BUT at their limit of liability i.e. the price they could have got the item (as long as it is like for like) from their selected jewellers i.e. Goldsmiths.

This then allows the policy holder to go off and buy the item elsewhere.

Why should the Insurance Company pay more money out for an item they can already source (and get a discount) just because the insured likes 'Jimmy's Jewellery Shop' round the corner?

I understand completely where your point comes from but there are two sides to the debate...

Just been trolling through the FOSs website and come across these:

repair, replace or cash? - october

complaints involving household contents insurance