Insuring a work of art is now a normal practice as art insurance has gained popularity:
It is estimated through research that global fine arts insurance market size is expected to reach around US$3700 million by 2028, growing at a CAGR of more than 4% during the period 2022-2028. What is defined as fine arts insurance is insurance cover for any item of art work, including paintings, sculptures, rare books, rare artifacts and valuable research results. The art insurance market is segmented into property insurance and title insurance and both personal and commercial policies are issued.
Art insurance has gained increased traction basically in view of increased awareness towards art and the value attached to works of art. Insurance companies, which are major players in this domain, too have promoted this product and have been offering attractive terms range. However, insurance experts feel consumer awareness about the product, which is a major factor in promoting such a product, needs to grow.
WHO ALL COVERED
Art insurance protects collectors and institutions, providing cover for their artwork against various risks – environmental damage or mishandling or vandalism or theft. Art insurance is mainly classified into 2 – private and institutional, private art insurance being designed for individual collectors and their art collections, and institutional art insurance being insurance meant for museums, galleries, auction houses, etc, offering coverage for their art collections or those entrusted to them by private art collectors. Institutional art insurance normally covers several risks, including theft and damage.
Art insurance policies by themselves cover several risks associated with owning and displaying art. There can be exclusions depending on the policy and the insurance company.
In general, art insurance policies cover loss or damage to artwork due to fire, theft, water damage, vandalism or natural disasters. They also cover theft and cost of restoration from damage. Some policies offer liability coverage for damage caused to third-party property or persons during an exhibition or transportation of a work of art.
EXCLUSIONS, PREMIUMS
Art insurance policies have also exclusions like damage caused by wear and tear, by climate or environmental factors, by war or terrorism or nuclear radiation.
Art insurance policy premiums are calculated based on several factors, including the piece’s current market value and type of artwork, the level of risk and the insurer’s underwriting policies.
The risk associated with a work of art often impacts the premiums. Artworks that are more vulnerable to damage, theft, or loss may have a higher premium. Insurance companies usually consider the artwork’s location, security measures in place, and the transportation frequency also..
Indian insurance companies have been providing art insurance cover for drawings, paintings, prints, sculptures, stamps, coins, watches and books among other assets or forms of art. Art insurance policies generally provide cover against unforeseen and physical loss or damage. The cover is also available against damage while in transit.
SETTLEMENT PROCESS
While settlement of claims in other forms of insurance follows a standard procedure and methodology, there are some differences in the case of art insurance. For example, while making a claim against damage or loss of a piece of art insured, the claimant has to immediately notify the insurance company either through writing or by calling up. The company then appoints a surveyor to examine the case and assess the damage caused. It is important that the owner of the work of art, who suffered the loss, has to provide all the relevant documents, including documents relating to ownership and proof of either the damage or the loss. Usually, the procedure of survey, assessment and reporting is quick to the extent that there are insurance companies that settle the claims on the very same day of reporting. The compensation is paid in line with the provisions of the policy and in terms of the losses sustained by the insured. Even the cost incurred in repairing a damaged work of art can be claimed by the insured.
It is interesting to know that some of the insurance companies into art insurance also have a system of employing their own specialist transit experts to handle transportation solutions for moving an insured high value piece of art from one place to other.
Insurance companies usually insist that the customer availing art insurance cover should get his or her work of art or collection valued through an independent valuer. Then underwriters of the insurance companies customize the coverage on the basis of the net worth of the work of art and calculate the sum insured..
The value of the artwork is a critical factor in determining the cost of insurance. The higher the value of the artwork, the higher the premium will be. Insurers may also take into account the type of art, as some types of art may be more expensive to insure than others.
An art collector’s or institution’s claims history is also a factor in determining the premiums. If the collector or institution has a history of frequent claims, there can be higher risks assigned and therefore higher premiums.
SOME EXCLUSIONS
There are certain exclusions, which insurance companies offering art insurance, insist. These include claims for damage caused during repairing, restoring, retouching and other similar processes, loss or damage due to natural wear and tear, rust or oxidation, loss or damage resulting from nuclear reaction, radiation or radioactive contamination, mysterious disappearance or unexplained loss etc.
Prominent insurance companies that provide art insurance in India are HDFC Ergo, Future Generali, Tata AIG and IFFCO Tokio.
Among the global players are Allianz, Progressive, AXA, AIG, Zurich Insurance, Chubb and Aon.
Apart from individuals who own works of art, museums, antique dealers, art exhibitors, curators, individual collectors and art dealers are also customers for this policy.
Experts – both insurance and those in evaluating a work of art – insist that if one is investing in an expensive work of art, it important to also invest in insurance so that there is peace of mind.
There are art insurance policies that offer broader coverage, like worldwide coverage or coverage for art on loan. Such policies are costlier, of course.
Intricacies in art insurance
There are 2 types of art insurance – ‘Title’ and ‘Property’. Title insurance offers coverage against a defective title and is a one-time expense. Title insurance is bought for valuable artwork, owned by many individuals and sometimes the artwork’s history is somewhat unclear. It is normally bought by art collectors, gallery owners and those who acquire substantial number of artwork. In the event of any defective title, the owners of the artwork get compensated by the insurance company.
Property insurance provides compensation if the insured artwork or collection is damaged, lost or stolen. Insurance companies offering Property insurance pay compensation depending on the situations and the circumstances leading to damage, loss or theft.
In normal circumstances, Title insurance policies cover 1% to 7% of the total estimated value of the work of art. This is so because in the cases of older pieces of art, it is difficult to track back to when the piece might have been in the artist’s studio. If there is no solid transaction record available for the piece, chances are that the insured will be paying more for Title insurance as it is deemed a higher risk.
Some of the factors that can be a deciding factor on the quantum of premium in art insurance are:
- Valuation of the work of art
- Chances of moving or lending the work of art
- Location of the work of art
- Conditions of storage of the work of art
- Status of the security systems at the location of the work of art
- The current condition of the work of art
- The level of restoration that would be required
In general terms, a person may be paying 1% 2% of the value of the work of art by way of premium.
Art insurance will cover damage or loss incurred on account of fire, theft, vandalism accidents etc and most policies also cover loss of income if the work of art is damaged or destroyed. There are also policies that cover forgery, which is when someone creates a fake work of art and tries to pass it off as the real. Insurance experts recommend that a person owning a work of art should opt for insurance in case the work of art is concerned is difficult or impossible to replace if it were damaged or destroyed.
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