The purpose of an insurance appraisal
An insurance appraisal is an appraisal prepared for a very specific purpose: to allow the insured to take out and maintain the correct cover and, in the event of theft, loss or damage, to be indemnified. Every technical choice in the document follows from that objective. The gap between the replacement value of collections and the sums insured under the policy is a widespread risk: it arises from valuations that are out of date or that refer to a different type of value, for example fair market value, and it widens as the years pass.
The replacement value standard
The type of value adopted is retail replacement value: the amount required to acquire on the market a work equivalent in artist, period, quality, condition, appearance and provenance, within a limited time and through the appropriate commercial channel, inclusive of all ancillary costs. It is normally the highest of the possible values and bears no relation to the purchase price paid at the time, since what matters is solely the current cost of acquiring an equivalent work. The document declares the adoption of this standard, sets out its formal definition and expresses it as a figure that can be entered in the policy as the sum insured.
Identification and photographic record of the work
The identification of the work must be exhaustive so that, in the event of a claim, an example of lesser quality cannot be offered as a replacement. The reference framework is the international categories for cataloguing works of art (type of object, materials, technique, dimensions, inscriptions, hallmarks, distinguishing features, title, subject, date and artist). To these are added an analytical description, the provenance and the exhibition history as far as they are known. Photographic documentation is an integral part of the document: images of the front, the reverse, details, signatures, labels and every particular mark.
The analysis of condition
Condition is described in detail and never summarised in a generic adjective. The appraiser records any damage, previous restoration and instability of the materials, attaching any existing technical reports. What has been documented before a loss is the basis on which the indemnity can be founded; reconstructing the appearance and condition of a work from memory or from family photographs is an extremely difficult exercise.
Validity in time and formal requirements
The appraisal bears the date of the examination of the work, the date to which the value refers and the date of issue, together with the appraiser's signature, professional qualifications, declaration of independence and the limiting conditions and assumptions on which it rests. An insurance appraisal, too, states the method followed and the market data used; the degree of detail of the comparative analysis is proportionate to the nature of the work and the complexity of its market. The value refers to a date: an insurance appraisal should be updated at regular intervals, as a rule every few years or when the artist's market changes significantly, and extended to the works acquired in the meantime.
The division of roles between appraiser and broker
The appraiser delivers the appraisal report to the client. From that point, the definition of the policy is a matter for the insured and their broker: the choice of type of cover, the contractual clauses, the handling of works in storage or on loan, and the procedures in the event of a claim. A well-conducted appraisal makes these discussions quicker and more effective, without replacing them. The appraiser is not a party to the insurance contract and does not negotiate with the insurer; a broker specialising in works of art will assess whether a dedicated policy is preferable to general household cover.