Our experts explain the methodical procedure that SafeGuard valuers undertake when determining an appropriate insurance replacement value for a watch.
Rising precious metal and diamond prices and the continuing popularity of prestigious branded watches are driving a steady flow of business to SafeGuard, the division of Assay Office Birmingham that carries out valuations for jewellery, watches and silverware.
Valuing a watch for insurance replacement can be quite a challenge. Depending on the age and potential availability of the watch, the value may be set as a new replacement value (NRV); second hand replacement value (SHRV); nearest alternative new replacement value (NANRV); or reasonable compensation value (RCV), at the valuer’s discretion.
As with all the professional services undertaken by the Assay Office, the first important step is careful visual inspection by an experienced expert. In valuing a watch the recognised norm is that the valuation is based upon external features, with no expectation that the case will be opened. The valuer’s opinion relies upon a visual inspection to include all visible components and serial numbers. Features such as dial printing and position of numerals/batons are also checked to see if they meet expectations.
In carrying out this inspection, the valuer will establish whether the watch is genuine and in its original state; a current model easily replaceable like for like; and whether it has any unusual features, or is part of a limited edition, which could enhance its value. The overall condition of the piece is also assessed. If the watch is deemed to be a genuine, current model then a valuation can be readily applied from the catalogue price list.
However, the valuation is not always this simple. An experienced valuer will usually know instinctively if a piece is ‘not right’. It could be a hybrid made up from various original parts from a legitimate source, but which create a product that is not recognised or available direct from the maker; or it could be a copy or a fake. If there are features which make the valuer suspicious that the watch is a counterfeit, he or she may seek the customer’s permission to carry out an internal inspection and ‘watch authentication’ at an additional cost in order to check part numbers on the movement and examine tell tale features more closely.
Some watches may be customised with additional parts such as diamonds added to the case, bezel, bracelet or dial, creating a product that is not available as an original. Such a piece is not directly replaceable and valuing such items, and old watches where the model is now discontinued, gives the valuer the biggest challenge in terms of arriving at a replacement value for insurance which is fair to both the policyholder and the insurer. A typical example of this is that an all-steel Rolex will never be set with diamonds, so if the watch to be valued has diamonds then these have been added by someone other than Rolex, after manufacture. In this case the NRV does not apply as it would be impossible to go and purchase this item outright. The valuer would therefore give either an SHRV or RCV.
The same approach would apply if the manufacturer no longer exists. In this case the standard approach is to assess the quality of the brand and its workmanship and to evaluate any precious metals used. The valuer would then seek to find a current market alternative if one exists. If this proves impossible, then an SHRV will be applied.
In seeking an appropriate equivalent, the valuer must ensure that he or she does not fall foul of the principle of ‘betterment’. This can occur when the finish or functionality of the original model is significantly exceeded by the current alternative. A car driver who crashed a 1982 Ford Escort would not expect to have it replaced with a 2012 Ford Focus, even under a ‘new for old’ policy, and the same applies here. A good example is the Breitling B2 Chronograph on a pin buckle strap. This was discontinued in 2007 when it retailed at £2,290. The NANRV in the range today would be a Skyracer Raven, at £5,090. Though this is an almost brand-to-brand replacement, in this instance the idea of placing an NANRV has to be considered as betterment, and an alternative method needs to be applied. This could be SHRV or RCV.
A slightly different example is the Omega nine carat ladies’ watches, which were popular in the 1970s but which are no longer manufactured. The method for valuing one of these will depend upon the condition of the piece. If the watch is in bad condition, the valuer might recommend a valuation based on the precious metal weight plus a standard mark-up. Alternatively, if the watch is in excellent condition then there are two options: SHRV or NANRV.
In cases such as these, dialogue and open discussion with the client and the insurance company is crucial to ascertain what is expected regarding the liability in the event of a loss.
A further complication arises where the watch is particularly rare or collectable, which must be acknowledged in the valuation. The Rolex Comex Seadweller, issued to Comex divers, bears the ‘Comex’ logo, which separates it from the standard model. These command prices way beyond the nearest alternative new Sea Dweller (116660) model, therefore it is paramount to identify non-standard models. RCV should be applied to these types of watches, as they can be difficult to source and are highly collectable.
In every case ascertaining that the watch is genuine is critical and taking time to consider a realistic replacement route and then applying a suitable value is key. In complicated circumstances, open discussions with the client and their insurer can also be very important.
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