Auto & General has lost a claim dispute after it proposed replacing a lost bespoke diamond engagement ring with one created by its own preferred jeweller, rather than the original craftsman.

The ring was identified as a "specified personal effect" under the terms of the home & contents insurance policy, with a value of $21,311. It was embossed with a unique brand mark and the bespoke jeweller said this stylised imprint indicated a level of prestige in the construction of the ring and elevated its price over competitors.

After the ring was lost in October last year, Auto & General accepted the claim and offered to have a replacement made, or to cash settle the cost it would incur for the work - $8390.

The owner took the matter to the Australian Financial Complaints Authority (AFCA), saying the ring was a handmade piece of jewellery and she wanted it replaced by the original jeweller.

AFCA ruled the insurer must have the original jeweller replace the ring, or cash settle the cost for that jeweller ($20,245), saying the ring had been marked in a unique way that could not be replicated by another manufacturer.

“The complainant purchased a handmade custom ring from a prestigious jeweller for a considerable sum. To allow another jeweller to replicate the ring without the unique mark would likely reduce its value,” AFCA said.

“It is fair in this instance that the insurer uses the original manufacturer to replace the jewellery.”

The insurer’s jeweller could not replace the ring to the exact specifications of its original form as it was not permitted to replicate the distinctive maker’s mark, AFCA said. The engagement ring was also part of a matching set that included two wedding rings from the same jeweller and AFCA said replacing one with another brand would diminish their collective value as the maker’s mark would be missing on one.

“The brand was of value to the complainant,” AFCA said. “It is likely the copy proposed will be inferior.”

AFCA said the insurer should not “simply elect to choose it as a preference” and there was no evidence the $21,311 amount was unreasonable or unfair.

“There is no reason the insurer should prefer another jeweller because it can provide a less expensive replacement. This might be permissible where there would be no difference in the quality, value or prestige of the ring.”

A sworn statement from the director of the original jeweller said the business had operated for more than 80 years and specialised in high quality handmade jewellery. A ring it made would attract a significantly higher valuation than one made by Auto & General’s selected jeweller, the director said.

Using the original jeweller would produce a ring with a retail value almost twice that of a replica made by the insurer’s preferred jeweller, AFCA said, and so such a replica “does not carry a value commensurate with that of the original,” and would be unfair.

AFCA said prestige associated with brand name was well established in the jewellery business and the ring was not a “generic purchase” but a handmade creation made and embossed with a unique mark by a named jeweller.

“The issue here is the insurer has not shown that its replacement option would result in a ring of the same value as the one that was lost,” the ruling said. “To permit a replacement made through (the insurer’s jeweller) would be to provide the complainant with lesser valued product.”

AFCA said the insurer must also pay the complainant's reasonable legal costs in relation to the dispute, up to $5400.

See the full ruling here.