Jewelry may be the quintessential Valentine's Day gift, but it has also become the darling of would-be fraudsters, according to Melissa Segel, fraud claim law specialist and commercial litigation attorney with law firm Swift Currie.

“There was a time when certain areas of the country were known for arson and family members would take turns burning property," Segel says. “But now, you can get a policy on a non-existent Rolex for $50,000 and 'lose' it three months later. That's much easier and less invasive than a house fire."

“We're seeing more and more crime rings where, instead of having to drive up to a department store and break a window to steal items, criminals can just pretend they own the stuff and make the claim," she continues.

Another factor that makes jewelry insurance fraud so appealing is “the value of the item is based on appraisals, which are not supervised," Segel says.

Independent insurance agents can be on the lookout for some common red flags that could indicate a prospect is buying a policy to commit jewelry fraud. “One red flag is you have no background with the person contacting you—they're coming to you for a jewelry policy, but they don't have a renters or homeowners insurance policy with you," she says. “Why do they have a $100,000 piece of jewelry but no home or apartment?"

Another red flag is the lack of a receipt for the initial jewelry purchase. “We frequently see an item of jewelry being passed around a ring of people. They might get individual appraisals in their own names, but won't have the receipt," she continues. “If they do have one, we often see fraud cases where there's white-out on a receipt, the name or date have been cut off, or there's no store name."

“And, of course, if the style or the cost of the item doesn't match the rest of the person's lifestyle—say if I drove up in my little Toyota to get a $300,000 piece of jewelry insured—that's a red flag," she says.

Other than refusing to sell the policy, there's not much agents can do at the front end of the policy sale before a fraudulent claim has occurred. But when a potentially fraudulent claim is submitted, agents should alert the carrier's special investigative unit with questions or concerns.

One indicator of a fake claim is a short period of time between the policy sale and the claim. “Another red flag is that the person doesn't have a good story for how they lost the item—they might have the crux of what happened, but they haven't thought about the details," she says. “Often, the first contact is the agent. So, they may call you and say, 'I lost the necklace when I was at the beach,' but won't be able to answer a follow-up question about where they were staying."

Social media is increasingly used to help fraud investigators gather evidence. Segel recalls one case in which a woman filed a claim for an item and afterward posted a picture of herself wearing the item online.

Social media also helps investigators gather clues about lifestyle misalignment. “I had one case where a woman filed an expensive jewelry claim, and she said she was an exotic dancer overseas and bought it with cash. But in all her social media pictures, she was wearing cheap jewelry," Segel adds. “If someone is a frequent social media poster who wears normal stuff but then all of a sudden claims fancy designer items, it's a sign to dig deeper."

AnneMarie McPherson Spears is IA news editor.