Introducing The Concept of Grading Insurance

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Posted By: bruce dorskind

Let's look another way to solve the problem of "altered cards"


Suppose we went to a major errors and ommissions liabilty insurance
company (they work with Wall Street and our hedge fund friends all
the time) and asked for their assistance.

Let's ask them to write an insurance policy which guaranted the following

If someone purchases a graded card either directly from the dealer
and/or via auction and within a three year time period it is discovered
that the card had been altered (not a difference of opinion between
PSA and SGC etc), then the buyer is entitled to a full refund.

The price of the insurance would depend on the card. The policy could
be written so all the authorized dealers and auction houses could earn
a signficiant commission for selling the insurance.

Furthermore only those dealers and auctioneers who passed a certain
test and/or assigned a letter of agreement with both the insurance
company and the grading company could sell the insurance.

If we create a large enough pool and if the percentage of altered cards
is less than 2% (which is something 200,000 cards- albeit probaly
higher amongst cards valued at over $5000) then it would appear
that this would be a viable idea.

Comments from Board Members who have worked in a profession
which requires errors and ommission insurance would be welcomed.

We'd also like to hear what PSA, SGC, Mastro, Lelands, Mile High, Sloate
Memory Lane and Goodwin etc have to say on the subject.

Look forward to your comments.


Bruce Dorskind
America's Toughest Want List

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Posted By: barrysloate

Bruce- that is actually a really good idea. But clearly there would be hurdles to overcome:

1) How would one determine an altered card to the satisfaction of the insurer when the alteration may be so small that there is a disagreement as to whether anything was really done to it.

2) If a card were deemed altered, and the buyer bought it three years ago for $1000 and today it sells for $5000, what is the victim entitled to?

These are just a couple of thoughts off the top of my head, but it may be the future of this hobby. Do you think there is an insurance company out there willing to take this on?

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Posted By: Joann

Now there's some innovative thinking. Off the top of my head though, why wouldn't the grading companies purchase this insurance as part of their regular business? Like malpractice or liability insurance. They reimburse the buyer, and the insurance company reimburses them.

And this idea comes full circle with the need to define within the hobby what exactly constitutes and alteration. Bad enough that two people might not agree what has been done to a card. Worse though that even if they can agree on what was done, they might still disagree as to whether or not it rises to the level of an alteration.

But even going down this path might be the goose the system needs for an industry standard definition for alteration.

Joann

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Posted By: jackgoodman

My initial reaction to the above was when I read this statement: "...within a three year time period it is discovered that the card had been altered..."

Right now, it is sometimes difficult to tell if a card has been trimmed, miscut or just poorly produced at the time of printing. Except for obvious alterations like coloring and the like, everything else could be classified "an opinion" and the insurance would never pay off. You can bet the insurer will have a staff of "experts" to make that determination and if you disagreed with their "decision," you would have to go to court. An even less favorable venue.

I'm in the mortgage industry and we require title insurance to insure the priority of one lien over another. When it is discovered that there was an error or a problem in clean title, the title company doesn't simply make good and pay off the lender, they make the lender jump thru hoops to resolve the issue themselves and then, when the lender is able to finally prove an "absolute" amount of a loss, the title company will come in and "make the lender whole" by paying them the difference. Not quite the simple system "insurance" would lead you to believe happened.

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Posted By: barrysloate

Jack- everyone's worst fear about insurance is that the insurance company understands the intricacies and loopholes of a policy better than we do, and if we ever find ourselves in a position where we have to make a claim, they will find a reason why it doesn't apply. You know the old joke about fire and theft insurance: you only collect if you have a fire and are robbed at the same time!

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Posted By: jackgoodman

Barry you're right. Gotten so I get depressed everytime I get my renewal policy because I know there are new exclusions and changes that I have no chance of understanding. Living on the West Coast, the joke is that if your home suffers major damage in an earthquake (and you didn't have earthquake insurance), better hurry and set it on fire, because fire is covered.

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Posted By: Griffin's

Forgive my ignorance on insurance matters, since my only experience is writing checks for premiums. But I would think that before an underwriter took on a policy like this they would want to assess their risk and exposure, correct? And in doing so they would need to find out how often cards were bought back, and need the cooperation of the grading companies to do that.
If they (PSA, SGC, GAI, etc) cooperated (which I doubt, unfortunately) it would give collectors a good insight into a rough number of altered cards that get slabbed, including the true scope of the Wiwag debacle. Do insurance companies disclose their information and assessment, or is that proprietery? Would this lead to insurance ratings for PSA/SGC/GAI?

Jack, thanks for the advice I dropped earthquake insurance years ago when the deductable reached 70% of the structures value.

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Posted By: MikeU

You already get this insurance for free from SGC with their guarantee? I am a little confused. Isn't PSA the only company that does not back their product and due to their market share, consumers take this on the chin?