Diamond Economics and The Future of Insurance

In 2020, I earned my certification in foresight from the Global Foresight Advisory Council. To my delight, I realized that “strategic foresight” was a formal practice the year before. Although I’d been practicing these skills long before, the certification gave words and refinement to something I had already been doing intuitively as part of my design process.

To me, being a futurist means you’re always asking, “what could happen?” It means staying curious about current events, spotting early signs of change, and imagining how these shifts might impact your industry. That’s how you create opportunities, anticipate customer needs, and build a resilient business that can adapt and thrive.

It’s also the best way to give yourself a fighting shot at creating lucrative disruption.

Today, I’m using one of my core tools, a framework I developed as part of my design process over several years. I call it the ‘Resiliency Framework’ and its job is to help users clarify a situation, imagine impacts, and question their current business model.

This example was inspired by this morning’s TBOY Podcast episode, “He went to Walmart.” The Queensmith diamond guides were an additional source.

CLARIFY

The price of a lab-grown diamond has fallen by 90% since 2019. Which could lead to more people owning more diamonds.

Not that long ago, all engagement rings featured natural diamonds, and a one-carat stone typically cost between $5,000 and $6,000 — a figure I had to look up. My 2009 engagement ring had a ¼-carat hand-me-down from my parents’ divorce, and my 2022 engagement ring was purchased without my involvement.

Today, half of all engagement rings have a lab-grown diamond in them, and in earring studs, that percentage is even higher. These diamonds cost significantly less than natural diamonds, which take billions of years to form and deep pockets to mine. In fact, Walmart sells a lab-grown one-carat diamond ring for just $299. 

Overall, the price of a lab-grown diamond has fallen by 90% over the past six years. And Walmart? Their diamond sales tripled last year thanks to these low prices.

What could this mean for the near future? More people will own more diamonds. The proportion of those being natural diamonds will decrease as lab-grown diamonds continue to flood the market.

Natural diamonds could increase in value, but they could also decrease in value because lab-grown diamonds are chemically identical and, once cut, appear identical to natural diamonds. Either way, fraud and forgeries will increase because the differences are only distinguishable with specialist laboratory equipment.

IMAGINE

Less jewelry will get scheduled coverage, savvy agents will sell more blanket coverage, and it’s likely P&C insurers will see a rise in personal property claims. Proof of origin will become a headache for customers and carriers alike.

In a world where jewelry is less valuable, but people have more, how is the insurance industry impacted?

I imagine fewer people would get scheduled jewelry coverage, likely relying on their homeowners, renters, or condo policies. If I bought a diamond ring for $299 (new diamond pricing) for example, I would not pay $50 per year (2019 diamond insurance pricing) to insure it. I would probably put that $50 toward more diamond jewelry meaning that soon, I’d have a nice little collection of treasures.

Therefore, I predict savvy agents / direct insurers will be able to use this shift to sell more blanket coverage, especially if it expands coverage for things like losing your ring flipping through clothing racks at Marshalls (my heart actually stopped when I realized my finger was bare).

Whether or not they coverage beyond their homeowner’s policy, when people own more diamonds, the chance that at least one gets lost or stolen increases. So, I imagine we’ll see a rise in personal property claims. One problem I see is that the lower financial value of lab-grown diamonds will not always transfer to the sentimental value of diamond jewelry. Classifying this situation as “lower-value items leading to more frequent claims but smaller payouts” does not even begin to address the toll this could have on adjusters, distraught customers, and consumer trust in the insurance industry.

Insurers will have to figure out how they address diamond jewelry purchased before proof of origin (lab-grown vs natural) was a consideration.

I once listened as an adjuster recounted a time when she really felt she had made a difference in a customer’s life:

A woman lost a pair of diamond earrings that her husband had gifted her when their first daughter was born. She had taken every safety measure during surgery, but upon waking, she discovered the earrings were missing. The jewelry was deeply meaningful, as it connected her to her late husband, who had very recently passed away. Both she and her claims adjuster, who had a daughter of a similar age, felt emotional about the loss. After helping her process the claim, the adjuster suggested she use the money to create new memories with her daughter.

I can’t help but think of this experience through the lens of a 90% decrease in financial value. In situations like this, what makes financial sense will likely not make sense in the context of personal loss.

QUESTION

Insurance carriers should start asking these questions to prepare for impact:

• How will this shift in the diamond market impact my pricing models for homeowners, renters and condo insurance? Do I need to refine my underwriting criteria?

• How will I leverage this shift in the diamond market to create or update a blanket product that meets peoples’ future needs?

• How will I encourage people who own natural diamonds to schedule their jewelry with an appraisal to limit the potential for unpleasant claims experiences down the road?

• How will I account for a significant discrepancy in the financial value of chemically and optically identical diamonds in my claims process? Can I afford to consider my customers’ sentimental evaluation? Can I afford not to?

• How can I adjust my claim operations in anticipation of increased volume? What happens if the volume represents small financial claims with big emotional back-and-forths with adjusters and claim service representatives?

• What happens to consumer trust if people unwittingly walk into higher premiums by submitting more homeowners’ claims? Or if their claim is denied because they don’t have an appraisal, and the financial value of their diamond is less than their deductible?