A supportable value product such as diamonds is guaranteed for an
extended period of time so that an owner can return the product
at any point over the guarantee period for a complete refund of
the amount paid for the product. The products are covered by an
insurance policy by a respected insurance carrier so that if the
owner wishes to return the product, the total amount paid for the
product is refunded. The insurance policy covers at most the retail
price less the wholesale price paid to the seller. The products,
for example gemstones such as diamonds, are characterized and identified
with a unique identification before being mounted and sold via a
store or through the television or internet. The merchant coordinates
and controls interactions and data between various entities such
that the products are quickly prepared and shipped to the customer
and the entities are paid within a short period of time.
1. A method of providing a supportable value product, the method
comprising: procuring the supportable value product for a purchase
price; establishing a selling price for the supportable value product;
procuring from an insurance carrier an insurance policy on the supportable
value product, the insurance policy setting a guarantee period for
return of the supportable value product by an owner of the product;
and offering the supportable value product for sale at the selling
price; and reimbursing at least a portion of a profit margin of
the product via the insurance policy when the product is sold by
a merchant and returned within the guarantee period.
2. The method of claim 1, wherein the supportable value product
comprises a diamond.
3. The method of claim 2, wherein establishing the selling price
of the diamond comprises characterizing the diamond using cut, color,
clarity, weight and dimensions as well as an assessment of light
performance of the diamond.
4. The method of claim 1, wherein the guarantee period is at least
5. The method of claim 4, wherein the guarantee period is at least
6. The method of claim 1, further comprising inscribing a unique
identification on the supportable value product before procuring
the insurance policy.
7. The method of claim 1, wherein offering the supportable value
product for sale comprises advertising the supportable value product
on a shopping channel or over the Internet.
8. The method of claim 1, further comprising authenticating the
returned supportable value product, the guarantee valid only if
the returned supportable value product is in the condition in which
the product was purchased.
9. The method of claim 1, further comprising procuring a right
of first refusal for returned product from the insurance carrier.
10. The method of claim 1, wherein the insurance policy is procured
by a wholesaler of the supportable value product.
11. The method of claim 1, wherein the merchant is responsible
for a specific product return within a preset period after sale
and insurance registration of the specific product.
12. The method of claim 1, wherein a wholesaler of the product
submits a projection of estimated periodic sales and aggregate value
of product to be insured and prepays a premium based on the estimate
for a preset period.
13. The method of claim 1, wherein a wholesaler of the product
lists the product on at least one of a closed dealer network at
wholesale prices or a consumer accessible website showing retail
prices and available dealer locations.
14. The method of claim 1, wherein the product may be returned
to a dealer of the product who is authorized to received returned
15. A method of providing supportable value product, the method
comprising: establishing a selling price for the supportable value
product; establishing a guarantee period for return of the product
by an owner of the product; procuring from an insurance carrier
an insurance policy on the product; offering the product for sale
at the selling price; and establishing acceptance procedures for
return of the product if a returned product is returned in a similar
condition to a condition in which the product was purchased within
the guarantee period, the insurance policy covering an amount of
at most a profit margin of the product, wherein the acceptance procedures
include at least one of: a dealer to whom the product was returned
purchasing the returned product from the insurance carrier for the
amount, the dealer choosing to retain the product with new insurance,
a wholesaler purchasing the product from the insurance carrier for
the purchase price less a cost of the insurance policy, and the
dealer paying the wholesaler a current purchase price of the product
and paying the insurance carrier the amount, the dealer declining
ownership of the product, or permitting a trade-in by the owner
where the owner pays a difference between a current selling price
of a new product less the selling price of the returned product.
16. The method of claim 15, wherein the product comprises a diamond.
17. The method of claim 16, wherein establishing the selling price
of the diamond comprises characterizing the diamond using cut, color,
clarity, weight and dimensions as well as an assessment of light
performance of the diamond.
18. The method of claim 16, wherein the guarantee period is at
least one year.
19. The method of claim 15, wherein the insurance policy is procured
by the wholesaler.
20. The method of claim 15, wherein the merchant is responsible
for a specific product return within a preset period after sale
and insurance registration of the specific product.
21. The method of claim 15, wherein the wholesaler submits a projection
of estimated periodic sales and aggregate value of product to be
insured and prepays a premium based on the estimate for a preset
22. The method of claim 15, wherein the wholesaler lists the product
on at least one of a closed dealer network at wholesale prices or
a consumer accessible website showing retail prices and available
23. The method of claim 15, wherein the product is returned to
a dealer of the product who is authorized to received returned products.
24. A method of providing supportable value product, the method
comprising: establishing a wholesale price for a supportable value
product; establishing a retail price for the product; procuring
from an insurance carrier an insurance policy on the product, the
insurance policy setting a guarantee period for return of the product
by an owner of the product if the product is in a similar condition
as when purchased and establishing a payment to a merchant who sold
the product of at most a portion of the retail price less the wholesale
price of the product; offering the product for sale at the retail
price; and refunding the selling price to the owner if all of a
set of predetermined conditions of a return have been met by the
 The present application claims the benefit of U.S. Provisional
Application Ser. No. 60/669,246, filed Apr. 7, 2005, pending, the
entirety of which is incorporated herein by reference.
 The present application relates to transactions involving
supportable value products, such as gemstones and/or jewelry, and
linking insurance to that transaction.
 The retail jewelry market in the United States is estimated
to have generated $27.7 billion in retail sales in 2003, not including
department stores and discount stores. As shown in Table 1, this
is a 6.9% increase over the previous year. The data for Table 1
can be found at the U.S. Department of Commerce at http://www.census.gov/econ/census02/.
Similar increases, with a few scattered decreases indicate that
jewelry sales are primarily increasing from year-to-year. The average
increase is 5.5%. Of the $27.7 billion in jewelry, $6.7 billion
is estimated to be in solitaire diamond rings, diamond pendants,
and diamond earrings. TABLE-US-00001 TABLE 1 Year Total % Inc/Dec
Prev. Year 2003 $27,092,000,000 6.9% 2002 $25,344,000,000 4.8% 2001
$24,176,000,000 -4.6% 2000 $25,338,000,000 5.3% 1999 $24,068,000,000
11.8% 1998 $21,527,000,000 8.8% 1997 $19,778,000,000 -2.7% 1996
$20,317,000,000 6.1% 1995 $19,152,000,000 6.4% 1994 $17,996,000,000
8.6% 1993 $16,571,000,000 9.1% 1992 $15,184,000,000
 Looking at the engagement ring market, for example, the
estimated population of the United States by the Census Bureau at
the end of 2004 was 294 million people. This information can be
found at http://factfinder.census.gov/home/saff/main.html?_lang=en.
The number of marriages during this period was 2.64 million, in
which a diamond engagement ring was given 80% of the time. This
gives a total of 2.1 million diamond engagement rings sold in 2004.
Table 2 illustrates a projected market size of engagement rings
sold in the U.S. for the next 4 years based on the Census Bureau
data. TABLE-US-00002 TABLE 2 Year 2005 2006 2007 2008 Population
297,301,047 299,917,296 302,556,568 305,219,066 Marriages 2,675,709
2,699,256 2,723,009 2,746,972 Engagement 2,140,567 2,159,405 2,178,407
2,197,578 Rings Sold
 As illustrated by predictions in Table 2, the population
of the United States, the number of marriages, and the number of
sales of engagement rings containing diamonds are expected to increase
by 1-1.5% each year for the next several years. Unfortunately, couples
marrying for the first time face roughly a 40-50% chance of divorcing
in their lifetime. The median length for a first time marriage ending
in divorce is eight years and, overall, 43 percent of marriages
break up within 15 years. In fact, 43% of first marriages involve
a partner who has been married at least once before and 54% of divorced
women get married again within five years of being divorced. Thus,
a portion of the market for engagement rings contains women who
have been divorced at least once. Moreover, it is likely that a
substantial percentage of divorced women who are to be married again
(or even do not plan on getting married again) will retain their
 Many retail outlets have return policies for products. The
term product includes individual diamonds, diamond jewelry, individual
colored gemstones, and any jewelry or jewelry related item. The
return policies vary, some giving a full money back guarantee for
any reason for a very limited period of time, usually 7-30 days.
Other policies give store credit/exchange for the same period of
time. In either case, the product must be returned in its original
shape, i.e. undamaged, to obtain the refund. The refund or exchange
benefit is generally not applicable to product that is engraved,
inscribed or significantly altered.
 As indicated in Table 2, in most cases a diamond is retained
by its owner for a time period that exceeds the limited time period
for a refund or exchange. If the owner of a diamond, for example,
wishes to return it (e.g. after a divorce), the original seller
may buy back the diamond at the current wholesale price or lower
depending on the financial condition of the business. As diamonds
are essentially a commodity, the wholesale prices do not tend to
vary dramatically, generally increasing slightly from year-to-year.
 Unfortunately, because the markup from the cost of product
such as a diamond before operating expenses for a store is potentially
large, the current wholesale price may be about 50% or less of the
retail price paid for the product. The markup is large for product
in general due to the relatively small amount of sales and relatively
large expenses of the merchant such as inventory, security and theft
prevention costs, property leasing, sales staff salaries, and marketing.
The seller is thus unlikely to pay more than the wholesale price
of the product. This tends to undermine the confidence of the owner
in making a later purchase, as the value of the product may be significantly
lower (usually 50-75%) than the initial amount paid. In addition,
as the purchase appraisal of the product given for insurance purposes
is normally at least the purchase price, this situation may also
cause additional confidence problems if the owner has an insurance
policy that covers product and finds out that the insurance premium
he is paying is based on a coverage amount significantly higher
than the cash replacement value.
 In addition, often the various entities that provide the
services in supplying the final product to the consumer must wait
an extended period of time (for example, up to several months) to
be paid for their goods and services. This is problematic and leads
to higher prices.
BRIEF DESCRIPTION OF THE DRAWINGS
 FIG. 1 illustrates a flowchart of contracting for product
and services and setting the price of product in one embodiment.
 FIG. 2 illustrates a flowchart for order processing in one
 FIG. 3 illustrates a flowchart for product path in one embodiment.
 FIG. 4 illustrates a flowchart for documentation in one
 FIG. 5 illustrates a flowchart of contracting for electronic
tracking of documentation in an embodiment.
 In order to address the problems above, a system and method
is described where the time of return for product is substantially
increased and the product is coupled with insurance. By issuing
an insurance policy with the purchase of the product, the original
purchase price is guaranteed to be received by the purchaser at
the time of return during the term of the insurance policy.
 As described above, the limited return/exchange policies
for product of various sellers are of limited merit due to the average
length of time for the product to be returned. Merely increasing
the guarantee period from the typical 30 day period may not be enough
to attract a potential customer. That is, it may be unlikely that
a purchaser will buy similar product from one merchant rather than
another merely because the first merchant provides a 30 day full
refund guarantee while the second merchant provides a 6 month full
refund guarantee. Other factors may instead be more relevant to
the decision of the purchaser regarding from whom to purchase the
product. These factors can include, for example, cost of the product,
location of the store or merchant selling the product, overall convenience
to the purchaser, or any personal relationship between the purchaser
(or recipient) and the merchant.
 If prices are similar, an extended guarantee period may
attract potential customers. However, it may not be feasible for
a merchant to merely increase the guarantee period to the extent
that it makes an impact on the purchaser. As the markup on the product
cost tends to be larger than on other consumer goods, the merchant
loses essentially all profit from the original transaction if an
item is returned for a full refund. If the guarantee exists for
an extended period of time, the merchant could be forced to liquidate
his stock at lowered prices to pay his debts or even cause bankruptcy
if the merchant is required to issue a large number of refunds in
a relatively short time period. Moreover, if the guarantee exists
for an extended period of time, the merchant could retire or go
out of business for numerous reasons before the end of the guarantee
period, leaving the owner of the product with no recourse if he
or she wishes to return the product within the guarantee period
but after the business is closed.
 To alleviate these problems, a method of securing the value
of the product to a purchaser or owner is described below. This
method can take the form of, for example, a guarantee that is valid
for an extended period of time and is coupled with insurance. More
specifically, a method of obtaining an insurance policy issued and
underwritten by an insurance carrier and coupling the insurance
policy to the product when the product is sold to the purchaser
is described. The coupling of third party insurance and product
that substantially retains its value (also referred to as a supportable
value product) permits a seller of the product to substantially
increase the guaranteed return period to one or more years, if desired.
This, combined with a decrease in the cost of product sold to below
retail value and extensive product and retailing expertise, permit
a seller to bring to market product at competitive pricing while
offering protection to a customer, which will allow the customer
to make lower risk purchases for the guarantee period. In the event
that product is ordered, the product may be quickly prepared and
shipped to the customer if not immediately available and the various
entities (e.g. product supplier, insurance carrier, gem lab, manufacturer)
may be paid within a short period of time, such as one or two business
 In addition, by decreasing the gap between wholesale and
retail cost there is greater incentive for the original seller to
alleviate the need to use the insurance to buy back products. This,
in turn, makes the sale of the insurance even more palatable to
an insurance carrier and may result in lower costs. A portion of
the insurance premiums may also be diverted to an escrow fund to
pay claims during the term of the policy. This reserve fund may
be eventually available to the merchant and partners of the merchant
at the end of the exposure (guarantee) period when all liabilities
have been satisfied.
 Throughout this document, various terms are used. The owner
of the product may be the original purchaser or legal heir of the
original purchaser, who possesses a death certificate and trust
and/or court documents indicating ownership (submission of claims
by an heir may lengthen the refund process and require a transfer
fee for the cost of verification). Ownership may be transferred
via other means, such as resale of the product. Other entities described
include a wholesaler, who is the producer and/or provider of product
for the dealer.
 The wholesaler may contract for Value Assurance Insurance
(also referred to simply as insurance) through an insurance carrier.
The wholesaler can be any combination of, but not limited to, the
following jewelry industry classifications; sightholder, cutter,
wholesaler, manufacturer, etc. The dealer may be the retail establishment
contracted by the wholesaler to sell product to a consumer and handle
returns from the consumer. Value Assurance Insurance is an insurance
policy designed to provide a 100% money back assurance, at various
rates and terms, on product purchased by the consumer. The insurance
carrier is one or more insurance companies that provide the insurance.
This may also be a consortium of entities providing insurance, reinsurance,
claims processing and brokerage service. A broker is a licensed
purveyor of insurance products. An administrator is one or more
third party companies contracted by the insurance carrier and/or
wholesaler to offer any combination of marketing, advertising, auditing,
claims processing and consulting services. The administrator is
an optional entity in the process if the carrier and/or wholesaler
choose to perform any or all of these processes in-house.
 The lab referred to herein is a gemological service that
contracts with the insurance carrier and wholesaler to verify quality,
authenticity and condition of the product, both prior to the product
being sold to the dealer and upon return from the dealer, on behalf
of the consumer and all parties to the process. The lab may also
provide additional services such as laser inscription identification
or the latest form of positive identification available.
 As used throughout the specification, the term "Gross
Margin" is defined as the ratio of gross profits divided by
net sales, the term "Gross Profit" is defined as the net
sales minus the cost of the goods, the term "Net Profit"
is defined as the gross profit minus all operating expenses, the
term "Net Profit Margin" is defined as the ratio of net
profit divided by net sales, and the term "Markup" is
defined as the amount added to the cost of product to give a retail
price (price to the consumer). These and other definitions are standard
accounting definitions and may be found in textbooks such as Intermediate
Accounting 6.sup.th Ed. by Kieso and Weygandt, John Wiley and Sons,
1989. The reserves are the capital withheld from premiums collected
and/or capital contributed and held for the purpose of satisfying
claims liability beyond projected losses. The premium is the amount
charged to satisfy the risk associated with insurance liability.
A central database is a server used to store any and all pertinent
data related to any and all processes described herein. A WAN is
a wide area network such as the internet or any other long distance
information sharing system. A LAN is a local area network such as
an internal computer network within a specific location.
 Although the systems and methods described may be applied
to various types of product if the durability, consistency in quality
and resale value can be achieved, for convenience, the various embodiments
described below generally refer only to diamonds and/or diamond
jewelry. For example, in some embodiments diamonds whose wholesale
cost typically does not vary significantly from year-to-year are
subject to the guarantee and insurance. Significant variation, as
defined herein, means a variation of more than about 5% per year.
Diamonds are a prime example of product whose wholesale value historically
has not varied significantly due to the method of the distribution,
supply, demand and durability. The condition of a product deemed
to have superior sales, visual beauty, re-salability, durability,
appreciable value and insurability such that the product is suited
to being re-purchased by the wholesaler in the event of return by
a consumer is also called supportable value.
 In the figures, a number of entities are described. These
entities include a diamond supplier, insurance carrier, gem laboratory,
jewelry manufacturer, finance company, retail and wholesale order
center, fulfillment center and various retail and wholesale sellers.
The diamond supplier has a cut or uncut diamond. If the diamond
supplier has an uncut diamond, they may cut it themselves or supply
it to a facility that cuts diamonds, i.e. a cutter, who returns
the diamond after it is cut. The diamond is supplied from the diamond
supplier to the grading lab. The diamond supplier may be the diamond
cutter, a diamond wholesaler, or a diamond retailer, for example.
 The grading lab may assess the light performance of the
diamond and guarantees a high level of visual beauty on all purchases.
The light performance may be assessed using a light source and a
light detector, a computer that calculates the light path through
the diamond using specialized software (beam tracing), and projects
a three-dimensional image of the diamond showing the intensity and
color of the light return on a display. Alternatively, the assessment
of the light performance is determined using a photo-spectrometer
that electronically analyses the returned light from projected light
at multiple angles. A macro image of the diamond showing the intensity
and color of the light return in approximately 90,000 pixels may
then be displayed using sophisticated software. Due to the emerging
industry of light performance technology, other methods of determining
light performance may also be used.
 Diamonds with superior brilliance can be ascertained and
sold using any of these light performance assessment systems. The
lab may also use micro photography to assist in grading and identification,
or any other future applicable technology. The lab then may engrave
the diamond with a unique identification via a laser beam or other
engraving means. A lab report containing the identification of the
diamond, image, the light performance assessment, and a complete
summary is prepared and stored in a database maintained in the lab.
Note that diamonds are graded on five standard characteristics;
cut, clarity, color, weight and light performance (visual beauty).
One or more of these characteristics may be determined using the
Gemological Institute of America grading system, or any of a number
of other internationally accepted grading systems, for example A.G.S.
 The lab then may send the diamond and the report to a jewelry
manufacturer. A paper copy of the report can be sent with the diamond
while an electronic copy of the report is transmitted to the manufacturer.
The manufacturer produces a mounting, sets the diamond (making sure
the laser inscription on the girdle edge is visible), polishes the
mounting, quality checks the work, verifies the identity of the
diamond via the laser inscription and delivers the finished jewelry
to the fulfillment center. The manufacturer may be the diamond supplier
who supplied the diamond to the lab or a separate entity. The manufacturer
updates the electronic data to include the type of mounting as well
as any other information. The manufacturer sends the diamond as
well as transmitting the updated report to a fulfillment center,
discussed below. In another embodiment, the lab may also provide
these services rather than the manufacturer.
 The preparation process described above can be performed
on either reserved inventory or owned inventory. Reserved inventory
is gemstones that are ordered by the merchant from the supplier
and in which a specific amount is allocated for a period of time
at a contracted price with the understanding that the supplier will
be paid only for gemstones that are ultimately sold to a consumer
or seller. Owned inventory is gemstones that are actually held and
paid for by the merchant.
 The lab also transmits the lab report to the merchant as
well as the insurance carrier. The merchant acts as a central server
of data, negotiates the various contracts between entities and coordinates
payment to the various entities but does not, in general, physically
handle the diamonds. The insurance carrier writes an insurance policy
(the guarantee) based on the lab report. The insurance carrier stores
the information and determines the cost of providing the insurance
from the information provided thereto, the length of the guarantee
period, and other pertinent information.
 The various factors used in the determination can be stored
in a computer and calculated by a processor using a particular algorithm
stored in the computer. As diamonds are sold in lots in which the
diamonds in the lot have similar characteristics, the policy can
be based on the average characteristics of a diamond in the lot
(i.e. a percentage of the average wholesale or retail price) or
can be individualized to the characteristics of the particular diamond.
The lot number of the diamond may be included in the information
sent to the lab and in the identification etched into the diamond.
Thus, the merchant can obtain the initial insurance policy on the
diamond for the purchaser. The initial insurance policy is related
to return of the diamond during the guarantee period and is incorporated
into the purchase price. The purchaser or owner may purchase an
extension of the guarantee period from the insurance carrier. The
extension may be purchased from the insurance carrier directly or
through the merchant. The policy information is transmitted to the
fulfillment center. The fulfillment center may then send the policy,
the lab report, and the jewelry to a customer when purchased. The
merchant can additionally send marketing materials to the fulfillment
center for distribution to retailers and/or consumers.
 The fulfillment center transmits the diamond information
as well as marketing materials to a retailer (or seller) who subscribes
to the service offered by the fulfillment center. More specifically,
the fulfillment center verifies the identity of the diamond via
the laser inscription, prints the lab report, insurance document,
and marketing materials (e.g. care and cleaning, registration process,
upgrade process, return procedure, and warranty), photographs the
item for verification of condition, and ships the item. The retailer
advertises the jewelry and the guarantee to the public via any advertising
medium, such as radio, television, newspaper, internet, and/or fliers,
posters, or other physical advertisements. The retailer may include
online websites, television shopping channels or programs, independent
or chain jewelry stores, department stores, discount stores, and/or
buying clubs. For example, the initial marketing of the diamond
jewelry to consumers may take the form of television home shopping
channels. One or more shopping channels, for example, may be selected
to develop a live sales presentation and telephone order process.
This allows the brand of the company offering the guarantee to receive
greater exposure and strong selling opportunities quickly.
 A customer who hears about the jewelry and guarantee may
then place an order with an order center over the telephone or via
the internet. The order center may be run by the retailer, the fulfillment
center, or another entity. For example, if the retailer advertises
on a television shopping network, the order center may be a part
of the network. If the customer physically stops in the retailer's
store, the order center may be within the store. The order center
receives and processes the customer's request. The order center
may process credit card payments from consumers. If the jewelry
is purchased on an installment contract, the order center may transmit
this information to a finance company that coordinates the contract.
The order center may modify an electronic copy of a standard installment
contract for the finance company with preset terms for the diamond
at the time of purchase. If the diamonds are not immediately available
from the fulfillment center, the order center may instead receive
an order from a retailer at wholesale prices and provide the order
to the merchant, who then orders diamonds of the desired quality
from the seller.
 The order center also transmits the request to the fulfillment
center. In one embodiment, the fulfillment center is only for processing
and shipping; it does not handle order acceptance. The merchant
receives all orders and re-directs instructions to the various entities.
The fulfillment center transmits the diamond information, insurance
policy, marketing materials, and jewelry to the consumer. The fulfillment
center provides this material to the customer in person or ships
it to an address specified by the customer. The fulfillment center
may retain a copy of the policy and lab report and/or transmit a
copy to the retailer with whom the order was placed. The fulfillment
center also transmits information to the insurance carrier regarding
the diamond, retailer, and purchaser to the insurance carrier and
merchant so that the insurance policy commences. If the diamonds
are not immediately available, the entire process may take less
than about 48 hours from order to supply to the consumer if all
the entities that handle the diamond are located in a close geographical
area. Verification of identity for those individuals applying for
credit with a finance company might slow this process down depending
on the method of verification used by the finance company.
 More specifically, FIG. 1 illustrates a flow diagram of
contracting for products and services and setting the price of the
product in one embodiment of a system 10 for linking gemstones to
insurance. When setting the price, the merchant 12 negotiates a
number of contractual agreements:
 Short term guarantees of immediately availability and pricing
(e.g. 30 days, 60 days, etc . . . ) are negotiated with the diamond
supplier 14 for a pre-determined quantity of a specific weight and
quality range of diamonds. (For example, 1000 0.50-0.59 carat, round
brilliant diamonds, F-H (Gemological Institute of America (GIA)
Gradations) body color, SI1-SI2 (GIA) clarity, superior light return
in consistency, intensity and movement (scintillation) determined
via electronic beam tracing and/or photospectromatic testing or
other forms of testing. The merchant 12 negotiates pricing for the
services of a gemological laboratory 16 for grading, laser inscribing,
light performance testing, and delivery to a jewelry manufacturer
18 of processed diamonds. The merchant 12 engages in negotiations
with the jewelry manufacturer 18 for manufacturing settings, setting
diamonds, finishing, quality inspections, and delivery of finished
jewelry to a fulfillment center 20. A contract is negotiated with
the fulfillment center 20 for printing lab reports, insurance documents,
and marketing materials to be packaged with the jewelry in appropriate
presentation materials and for shipping the product to the retail
22 or wholesale 24 customer. The merchant also contracts with an
insurance carrier 26 to underwrite the guaranteed cash value insurance
policy to be coupled with the jewelry, possibly with property insurance
as well. Typically, the merchant also negotiates with a finance
company 28 for consumer credit programs that can be applied for
either over the telephone or on the internet. Each of these negotiations
is generally performed prior to any sale and may be performed concurrently.
 The merchant 12 may have a computer that contains a memory
in which weighing factors for the above characteristics are established.
These weighing factors are periodically updated, either manually
or automatically. The weighing factors are adjusted using one or
more sources well known in the diamond industry to determine the
wholesale price of the diamond. In one embodiment, the computer
automatically logs in over the internet to one or more websites
containing the wholesale information, downloads the data, and updates
the weighing factors accordingly. The wholesale price for the diamond
may be calculated directly from these factors by running a particular
algorithm on the processor. Alternatively, the memory may contain
prices for particular diamonds and the price of the actual diamond
determined by the processor by extrapolating between the particular
diamonds using a different algorithm.
 The sale price of the diamond may be calculated using the
wholesale price of the diamond and costs associated with the diamond,
which are stored in the memory. These costs include, for example,
insurance, mounting of the diamond, the laboratory costs for preparing
the grading report, other operating expenses, and marketing and
selling expenses. After the merchant calculates the fixed costs
of manufacturing and distribution and sets the cost of the diamond,
the merchant negotiates with television shopping networks, internet
shopping websites, and various types of physical retailers (discounters
and wholesalers) to sell and/or distribute the specific limited
quantity guaranteed value jewelry.
 As shown in FIG. 1, when products are sold, electronic orders
are transmitted to the merchant. The merchant then notifies the
diamond supplier who delivers a diamond to the gem lab. The gem
lab notifies the merchant of the information after processing the
diamond. Upon receipt of capital from the consumer or seller, the
merchant 12 pays the various entities for products and services
 The merchant 12 may be a holding company, clearing house
for documentation and a cash flow redistribution point. The documentation
can include contractual agreements with strategic partners. In this
case, the merchant encounters reduced operating costs as there is
no inventory expense, other than perhaps disposition of returned
product. The merchant may choose to retain inventory, for example
if product needs and potential sell through are able to be accurately
determined. In one embodiment, inventory may be retained by the
merchant prior to sale only if it results in higher profit margins
without raising prices. The merchant, acting as a central coordinator,
thus may have the buying power to obtain favorable rates from the
various entities such as the supplier, the lab, the manufacturer,
the fulfillment and order centers, and/or the insurance carrier.
These lower rates may be passed on to the consumer.
 FIG. 2 illustrates one embodiment of order processing. If
a retail consumer 22 orders over the internet or by telephone, the
retail order center 23 accepts the consumer order, enters the appropriate
data, and processes the credit card information. The retail order
center 23 may disseminate the appropriate data to a finance company
28, which then issues an installment contract and forwards the information
to the merchant.
 In one embodiment, the retail order center 23 enters information
into a website of the finance company 28, the finance company determines
the credit status of the customer 22, issues a credit line and rate,
and notifies the merchant 12 of the amount of credit, which the
customer then uses to purchase product. In other embodiments, the
customer can enter the information directly.
 The retail order center 23 also informs the merchant 12
directly. The merchant informs the diamond supplier 14 so that a
set of diamonds containing the particular diamond is ordered, if
not available immediately by the fulfillment center 20. The consumer
information is also sent to the insurance carrier by the merchant.
If the diamond is ordered at a retailer 24, the wholesale order
center 25 receives the order from a retail merchant at wholesale
prices and supplies the information to the merchant 12. The merchant
then sends the order to the diamond supplier 14. In either case,
the order is processed by the supplier 14, and the materials and
order are supplied to the gem lab 16, the jewelry manufacturer 18
and then to the fulfillment center 20.
 As illustrated in FIG. 2, when an order is placed with the
retail order center 23, a credit card number for the entire amount,
a check, or an agreement initiating payments on an installment plan
may be initiated by the consumer. The consumer may make an initial
payment when placing the order. The installment plan can either
be through the retailer, if purchased at a store, or set up by a
third party. The retailer pays the merchant. As above, the merchant
dispenses the funds it receives to the various entities involved
with the transaction: the diamond supplier, the insurance carrier,
the grading lab, the fulfillment center, and the jewelry manufacturer.
All orders taken by telephone, internet, or retailers are cleared
through the merchant 12 for proper tracking and billing. Methods
of payment, especially finance company contracts processed without
human verification, may incorporate procedures for verification
of identity to avoid identity theft. The retailers may alternatively
offer the product on a layaway basis that can either include insurance
immediately upon purchase and/or upon subsequent delivery.
 FIG. 3 illustrates a product flowchart in one embodiment.
As shown, once an order for a particular set of diamonds is sent
to the supplier 14, the supplier supplies loose cut diamonds to
the lab 16. The lab evaluates the diamonds and inscribes a unique
ID into each diamond. The lab sends the diamond along with the report
containing the ID to the manufacturer 18. The manufacturer produces
settings and mounts the diamond, and then supplies the diamonds
to the fulfillment center 20. The fulfillment center supplies the
diamonds to the store or retains the diamonds for delivery if ordered
via the internet or television. If the diamond is ordered, the purchaser's
information is transmitted from the order center to the fulfillment
center, which then forwards the information to the merchant 12 and
insurance carrier 26 to begin the guarantee period. The information
is retained by the various parties at least until the guarantee
period expires. The fulfillment center can also supply the diamonds
to the consumer after instructed to do so by the order center. The
policy information is supplied to the consumer through the merchant
12 and fulfillment center.
 FIG. 4 illustrates one possible flow of physical documentation
and/or electronic data in a sale of product. The laboratory quality
analysis documentation is sent to the insurance carrier 26, the
merchant/central data server 12, and the manufacturer. The diamond
that is the subject of the report is also sent to the manufacturer
18. The documentation is sent to the insurance carrier 26 to establish
criteria for the insurance policy. The original of the report may
be sent to the insurance carrier. The insurance policy, together
with the original lab report, is then sent to the fulfillment center
by the insurance carrier. The mounted diamond, along with the copy
of the lab report is also sent to the fulfillment center 20 by the
manufacturer 18. Marketing materials are sent to the fulfillment
center by the merchant. The fulfillment center 20 sends all of the
documentation to the stores 24. The fulfillment center 20 additionally
sends all of the documentation to the consumers once the diamond
has been sold.
 As indicated above, the insurance carrier 26 receives the
documentation and insures all of the diamonds sold based on the
documentation. The cost of the insurance to the merchant is relatively
small. Although the insurance carrier insures the entire retail
cost of the diamond, the insurance carrier does not have to assume
the entire retail or wholesale cost of the diamond. The insurance
carrier instead effectively insures the difference between the current
wholesale price of the diamond and the original sale price of the
diamond. This difference is smaller than either the current wholesale
price of the diamond or the original sale price. Moreover, the original
sale price remains constant and the current wholesale price of diamonds
generally increases somewhat from year-to-year. This decreases the
exposure of the insurance carrier and thus the cost to the merchant.
 The insurance carrier may be a high profile, well respected,
long standing insurance carrier such as Lloyds of London. If the
seller goes out of business or is otherwise unable to refund the
purchase price during the guarantee period, the insurance policy
insures that the owner of the jewelry is paid the original purchase
price by the insurance carrier. After the guarantee period, the
merchant is no longer required to refund the original purchase price
to the owner.
 The merchant may advertise that he offers the guarantee/insurance,
such as by displaying a special symbol. The guarantee assures that
purchase price will be fully refunded without regard to the reason
the jewelry is being returned, so long as the jewelry meets certain
qualifications and is being returned by the rightful owner. Examples
of the qualifications are provided below.
 The guarantee may be extended to a year or more. In one
embodiment, the guarantee could exist for several years, for example
five years. Such a long guarantee is more likely to persuade a person
who is going to purchase a piece of jewelry to purchase the jewelry
from the merchant. The expected return rate of the jewelry over
a period even as long as five years is less than 20%, however. The
guarantee period starts when the diamond is first purchased from
the merchant. If an attempt to return the diamond is initiated at
the end of the guarantee period and more documentation regarding
the rightful owner is desired by the merchant or insurance carrier,
the insurance carrier may extend the guarantee period by a predetermined
amount of time to gather the information (e.g. a week).
 A return to the merchant and purchase by an entity that
is not related to the original purchaser restarts the guarantee
period. If the original purchaser returns the diamond and then repurchases
the diamond, the guarantee period from the original purchase remains
in effect. A related purchaser may be defined to include a spouse,
sibling, child, parent, or any relation by blood or marriage to
the original purchaser. In addition, a related purchaser may include
a purchaser to whom the diamond was transferred at some point, directly
or indirectly, from the original purchaser. The merchant and insurance
carrier, accordingly, stores all transfers of the diamond (i.e.
tracks the diamond) in the respective storage means to permit proper
returns and stop improper extension of the insurance policy.
 In one embodiment, only the original purchaser can return
the diamond for the full refund. This is one way to maintain the
guarantee, as the policy follows the purchaser, and avoids potential
legal issues regarding property rights in the event of a failed
engagement or marriage. It also creates fewer problems for the finance
company in the event the consumer has outstanding debt against the
property. A service charge may be assessed if the consumer decides
to return a product for refund and subsequently buys the same product
back. The consumer may also be subject to current market pricing
at the time of re-purchase and the term of insurance may be determined
based on whatever contractual rules are originally agreed upon by
the carrier, wholesale and dealer.
 In other embodiments in which the diamond is transferred,
specific documentation indicating proof of ownership (e.g. notarized
documents, etc.) may be supplied to the merchant. In such an embodiment,
if ownership is transferred, the new information is transmitted
to the appropriate parties by the merchant and subsequently retained.
Specifically, the purchaser and/or owner contacts the merchant to
indicate that the transfer has occurred. The merchant stores the
identity of the new owner, linking it with the previous information,
and transmits the information to the insurance carrier (and possibly
finance company), who also links and stores the new information
with the previous information stored by the insurance carrier. A
service charge may be assessed for transfer of ownership.
 If the purchaser or owner wishes to extend the coverage
beyond the guarantee period, he or she can purchase insurance from
the insurance carrier directly or through the merchant through an
extension of the policy. The insurance can be a separate policy
between the purchaser or owner and the insurance carrier. Alternatively,
the extended guarantee period can be part of a homeowner or property
policy of the purchaser or owner. A homeowner policy typically covers
the owner's home and possessions inside the home against loss or
damage. In this case, the homeowner policy would cover not only
the loss of the diamond, but also return of the diamond.
 The insurance carrier sets the time period in which the
policy can be extended. For example, the insurance carrier can require
an extension to be purchased at the time the diamond is bought.
Alternatively, the insurance carrier can require the extension to
be purchased within a set time after the diamond is bought, for
example, 30 days to 1 or more years. The insurance carrier sets
the rates dependent on various factors such as the purchase price
of the diamonds, length of extension of the guarantee, financial
status of the purchaser or owner, financial status of the merchant,
and time of purchase of the extension policy. In a manner similar
that used to calculate the original insurance cost, various factors
can be stored in a computer and the rate calculated by a processor
using a particular algorithm stored in the computer. As indicated
above, as diamonds are sold in lots in which the diamonds in the
lot have similar characteristics, the policy can be based on the
average characteristics of a diamond in the lot, i.e. percentage
of the average wholesale or retail price, or can be individualized
to the characteristics of the particular diamonds sold.
 In one embodiment, engraved, inscribed or custom-made jewelry
as well as damaged jewelry or jewelry otherwise unable to be resold
are not returnable under the guarantee. The particular merchant,
however, can decide whether to refund any amount on his or her own.
Engravings or inscriptions identifying a particular diamond, rather
than personal engravings or inscriptions, remain under the guarantee.
In another embodiment, the guarantee may be bundled with property
insurance, for example, for diamonds purchased on finance contracts.
This combination would permit the owner to receive a replacement
of like and kind if the jewelry is damaged or lost.
 As indicated above, in many instances a diamond is purchased
on an installment plan. Once the initial sale is complete, the purchaser
deals with a finance company when the installments become due. In
this case, the diamond may be completely paid for or only partially
paid for when a refund is requested. The period over which the installment
plan runs can be longer or shorter than the guarantee period. In
one embodiment, if the diamond is only partially paid for when the
refund is requested, the merchant can opt to refund only the amount
that has been paid and forego the other payments. In another embodiment,
the diamond must be fully paid for before the total purchase price
is amount refunded. In other words, the owner of the diamond must
complete payment for the diamond before the full refund is issued.
When the diamond is returned for a full refund, the person returning
it may be required to sign (and perhaps notarize) a document stating
that the diamond is completely paid for or authorizing payment of
the remaining portion of the installment agreement to the finance
company. In addition, the person returning the diamond may sign
a document that releases the merchant from liability pertaining
to payment of an installment agreement.
 If an owner wishes to return the diamond, in one embodiment,
(s)he notifies the merchant, who reviews the data on the diamond
and owner. If the merchant determines that this is a valid return,
the merchant sends a prepaid envelope addressed to the gem lab to
the owner. The owner then returns the diamond to the gem lab via
registered insured mail (or a similar means), where it is inspected
for damage or alteration from when it was originally sold to the
purchaser and for authentication. If the gem lab determines that
the diamond is not damaged or altered, it notifies the merchant,
who then sends a check to the owner. The diamond is then sent to
the manufacturer for reconditioning and subsequent re-entry into
the distribution system. In other embodiments, the owner may also
return the jewelry in person to the seller, who then ships the return
in a prepaid package to the gem lab.
 To mitigate problems from fraud, in one embodiment, the
number of returns of different diamonds may be limited for each
entity, such as each individual or family (i.e. related individuals).
The information regarding the returns may be stored by the merchant.
This information may contain all returns from all sellers offering
the guarantee. When a return is attempted, the merchant checks the
history of the diamond and of the person/entity attempting the return
on their computer or by calling the central location. If a return
is close to the limit, for example within one or two times from
the limit, the merchant is notified and the person attempting to
return the diamond is informed that further attempts to return diamonds
may result in the guarantee being voided. If the limit is reached,
the guarantee may be voided and the merchant need not accept the
diamond. This information may be transmitted to the owner verbally,
when the owner is attempting to return the diamond, physically via
letter, or electronically, via email or a secure website.
 In cases of damaged or altered items, the merchant or a
central coordinator may be the sole arbiter of the extent and value
of the damages. When the merchant determines that the item is damaged,
the merchant may deduct the amount of the repair from the amount
to be returned (i.e. determine fair market value using industry
standard valuation guidelines). Alternatively, the guarantee may
be voided, e.g. if it is determined that the item may not be able
to be resold.
 Several product lines using diamonds may be developed. These
product lines may include, for example, round diamond solitaire
rings (primarily used as engagement rings), diamond stud earrings,
and diamond solitaire pendants in various grade qualities. These
and other categories may be chosen because they comprise about 25%
of all retail jewelry sales. The volume of sales in the above categories
for 2003 was estimated at $6.7 billion.
 The diamonds in the product lines above, in one embodiment,
may be in the size range of 0.33 carats to 1.5 (or more) carats.
These sizes are among the most popular sizes. The quality ranges
are dependant on consumer preferences, pricing/value, and availability
in the market. In some markets, the quality ranges may be I (color)
and SI2 (clarity) or better (GIA equivalent). As above, this grading
is prepared independently by a third party laboratory, which may
also laser inscribe a unique identification. The unique identification
gives the customer complete trust in their purchase, as well as
providing the insurance carrier some measure of comfort.
 While the extended guarantee policy as well as insurance
may draw some customers to buy diamond jewelry, additional incentive
may be used to further increase the market share. As discussed above,
the markup for diamonds is large and thus the price of diamond jewelry
is relatively high. The high price may dissuade consumers from purchasing
a diamond, or having to settle for a lesser diamond within their
budget. The high price may also dissuade retailers from offering
the guarantee as, at any point until the end of the guarantee period,
the profit made from a particular sale may be disgorged.
 By decreasing the markup for the diamond to a smaller, predetermined
amount, the price of the diamond jewelry concomitantly decreases.
In one embodiment, the markup is set by a single entity that controls
the right to offer the guarantee through the insurance carrier.
The markup is determined using a processor containing an algorithm
to calculate the markup from various factors, such as estimated
number of diamonds that will be sold over the period, competitive
market research, and the minimum income needed by the merchant.
The net margin, in one embodiment, is about 5-10% of the gross retail
price of the diamond. Commensurate with industry standards, this
results in slight lower competitive pricing due the streamlined
marketing, production, and distribution methods. By offering diamonds
of comparable quality for a much lower price or decreasing the jewelry
price, additional market share of diamond sales can be captured
and/or the amount of jewelry sold is likely to increase. This increase
in sales volume should at least partially offset the loss in markup
for selling a smaller volume of diamonds at a higher price. By lowering
the markup, the amount of profit per returned diamond is less. As
it is likely only a relatively small percentage of the diamonds
will be returned, this means that the merchant does not suffer excessively
from lost gross profit due to returns.
 By streamlining the manufacturing and distribution process
and lowering the need for excessive inventory, the retail price
can be 30 to 50% lower than most current retail outlets and offer
significantly greater supportable value. The net profit margin (the
profit retained after cost of product and operating expenses) of
between 5-10% for the merchant is similar to most industry standards
and can potentially be maintained. Another potential benefit is
an increase in consumer confidence as a result of the insurance
company backing, which may lead to significantly increased sales
by producing a low risk purchase for the consumer.
 Although not specifically discussed in all cases, the information
passed between the various entities can be transmitted as electronic
data. The electronic data can be provided between individual entities
or to a central server (maintained, for example, by the merchant)
for dissemination to the desired entities. The electronic data can
be transferred or copied from an electronic memory in a computer
in one entity to a memory in another entity. The memory can be any
memory capable of storing information, an electronic memory such
as an EPROM (Electrically Programmable Read-Only Memory), EEPROM
(Electrically Erasable Programmable Read-Only Memory), flash memory,
CD (compact disc), DVD (digital video disc), or magnetic tape. Communications
between the entities may be automatic, with updates occurring periodically
and initiated by a processor of either entity, or when a flag is
sent from a processor in the entity that contains the new data to
a processor in the entity to which the new data is to be supplied.
The electronic data may be sent to only one entity or may be available
to one or more entities, for example, over the internet to view
and/or download if the appropriate access code is used.
 The various storage, calculation, and transmission stages
may occur via electronic or non-electronic means. For example, information
may be transmitted via telephone, email, secure website, fax, regular
mail, and/or messaging. Storage can be in an electronic memory device
or a physical file folder. Calculations can be accomplished by a
processor in a computer or on paper using charts and tables. Storage,
calculation and communication may take place at individual locations
(for example, where a particular item was purchased) using individual
processors or at a central location that contains all of the information
gathered and uses one or more processors located at the central
location. Alternatively, transactions may be orchestrated via electronic
prompts from, and reports to, a server or other computer at a merchant.
Retail customer orders may be directed to the merchant computer,
or notification of an order may be sent to the merchant server,
so that the various steps discussed herein of procurement, valuation,
financing, insuring and transportation of the product may be initiated
and/or tracked by the merchant server. In addition, the refund process
may be automated and routed through the merchant server or other
computer systems, such as that of the insurer.
 In another embodiment, the business that sold the diamond
may not be bankrupt but does not have the financial capital to refund
the purchase price to the owner of the diamond. In this case, the
insurance carrier refunds the purchase price and may give the business
a right of first refusal before selling the diamond. When the insurance
carrier offers the diamond for sale and a third party accepts the
offer, a right of first refusal permits the business to have the
first chance to purchase the diamond at the amount offered. The
right of first refusal permits the merchant to absorb all returns
back into the system at a particular price (such as around the wholesale
price) or less and limits the exposure of the insurance carrier.
In addition, this promotes lower premiums and gives the merchant
the opportunity to limit the potential for liquidation by the insurance
carrier at prices that might allow another seller to undermine the
pricing structure of the product. Maintaining consistent retail
pricing perpetuates the image of solid supportable value. The right
of first refusal may be for all diamonds over a particular return
percentage of sales or from a first return percentage up to a second
return percentage, after which the insurance carrier can sell to
the third party at any price.
 In other embodiments, rather than the insurance carrier
paying the owner of the product if the business cannot refund the
purchase price, the insurance carrier may insure only the difference
between the original wholesale price and retail (sale) price or
a portion thereof, as determined by contract (i.e. insurance). Thus,
the amount that the insurance carrier is responsible to repay is
determined at the time the product is purchased. This set amount
may keep premiums relatively lower than if the insurance carrier
has to refund the entire retail price and then itself must determine
how to resell the product. In the former case, the premium is based
on the average return rate, the retail price, and the probability
that the retailer will be unable to refund the sale price, which
may be difficult to estimate. In the latter case, however, the premium
is based on an easier calculated value: the average return rate
and the average profit margin, which is much less than the retail
price. The wholesaler and/or retailer may carry some of the burden
for the premiums. The wholesaler and/or retailer may also have to
pay additional fees, such as to buy into the insurance program,
or to pay for advertising, for example.
 In one embodiment, the insurance carrier pays the owner
and is reimbursed by the wholesaler. The insurance carrier may retain
the right to sell the product for a higher amount than the original
wholesale price if the market exists. In other embodiments, the
retailer may retain the right of first refusal at the original retail
price. When the product is returned, before the purchase price is
refunded, the product may be sent to the lab for verification and/or
renewal of insurance. The new insurance contract and premiums may
reflect a change in the wholesale or retail prices or difference
 In one example, when the product is returned and authenticated,
the insurance carrier refunds the purchase price to the consumer,
provides the product to the wholesaler or retailer in return for
the wholesale price at the time of the original sale or in return
for the wholesale price and a portion of the difference between
the wholesale and retail prices. Alternatively, when the product
is returned and authenticated, the retailer may refund the entire
retail price to the owner, place the product back into inventory
and submit a claim to the insurance carrier for a portion of the
difference between the wholesale and retail prices.
 Or, when the product is returned and authenticated, the
retailer may refund the entire retail price to the owner, send the
product back to the wholesaler and submit a claim to wholesaler
or the insurance carrier for the wholesale price plus a portion
of the difference between the wholesale and retail prices. In this
case, if the wholesaler pays the retailer and retains the product,
the wholesaler obtains a refund from the insurance carrier for the
wholesale price and perhaps a fraction of the portion of the difference
between the wholesale and retail prices. On the other hand, if the
insurance carrier pays the retailer while the wholesaler retains
the product, the insurance carrier obtains the wholesale price and
perhaps a fraction of the difference between the wholesale and retail
prices from the wholesaler.
 To set up and implement insurance, a number of conditions
may be met. These conditions include formation of a captive insurance
carrier and/or negotiation with an existing insurance carrier to
design and offer an insurance product. The captive insurance carrier
may be located in a domicile suited to the best possible strategic
and tax beneficial circumstance. The insurance product, as above,
underwrites the difference of cost between the original purchase
price amount refunded to the consumer, having previously purchased
product from a dealer, and the partial reimbursement of the retail
price paid for the product by the consumer, from the wholesaler
and/or dealer. This may be done by any combination of insurance
and/or re-insurance contract. One or more insurance brokers may
also be contracted for policy issuance and licensing. One or more
specialized insurance industry consultants or consulting firms may
be hired for assistance in developing this process.
 A contract is then developed between one or more carriers
and one or more wholesalers. The contract may permit the wholesaler
to produce a supportable value product for resale, to be distributed
to a group of contracted dealers, potentially willing to accept
a portion of the future consumer refund liability. The contract
may provide for the wholesaler to purchase insurance from either
the carrier or carrier's broker underwritten by either one or more
existing/captive insurance companies, and/or one or more re-insurance
partners to permit coverage of the gap between the refund of the
original purchase price paid by the consumer and the refund liability
amount agreed upon via contract by the wholesaler and/or dealer.
 A contract may then be formed between the wholesaler and
dealer. This contract may specify the guidelines of the process
and the obligations of both parties. This may include a guarantee
of profit for the retailer regardless of any returns. A waiting
period for filing claims with the insurance carrier may exist. During
this time, e.g. 120 days after sale and insurance registration of
the product, the dealer may be responsible for 100% of any short
term returns. A maximum limit of claims may be allowed before the
dealer becomes responsible for 100% of their previous profit.
 One or more third party companies may be contracted or formed
to handle various responsibilities. These responsibilities may include
selling the overall insurance concept to wholesalers and dealers,
administrating the billing and auditing of insurance premiums, administrating
the claims process, developing software for communications (including
but not limited to web based applications), marketing, tracking
and bookkeeping, maintaining a domicile and domicile manager for
a captive, and developing and implementing a marketing and advertising
strategy and campaign.
 One or more gemological laboratories may be contracted for
grading, identifying, laser inscribing, photographing, and documenting
product for value assessment and future return verification. This
can be done using any current and/or future technology in combination
with visual inspection and application of jewelry industry accepted
 Staff and/or consulting services may be hired for developing
electronic data storage and transmission software and hardware systems.
A secure WAN communications network may be developed for real time
information transfer between all involved parties including but
not limited to the wholesaler, dealer, insurance carrier, lab, consumer,
and any and all service subcontractors. A location may be established
to serve as a base for the central database accessible via a WAN
connection and/or LAN.
 The product production and distribution process may be designed
around a WAN environment. An example of electronic documentation
tracking is shown in FIG. 5. In the process, the wholesaler may
submit a projection of estimated periodic sales and aggregate value
of product to be insured and prepay an insurance premium based on
the estimate for the period agreed upon by the insurance carrier
and wholesaler. The actual product insured may be audited and premium
adjusted on a periodic basis at the discretion of the insurance
carrier. The periodic basis may be, for example, monthly, quarterly,
semi-annually or yearly. All WAN functions or transactions may contain
electronic legally binding license agreements that are to be accepted
prior to proceeding with the process, an example of which is discussed
with reference to FIG. 5.
 Referring now to FIG. 5, the wholesaler produces an amount
and value of product that is consistent with the supportable value
parameters agreed upon by the wholesaler and insurance carrier.
The wholesaler sends the product to the lab for independent assessment
(at step 30). The lab may do one or more of the following: laser
inscribe, grade, measure, produce reports and return the product
to the wholesaler (at step 32). The information derived may be placed
on a printed or electronic report that may ultimately be given to
the consumer and recorded, serialized, and/or stored in the central
database via the WAN and/or LAN (at step 34). The individual grader
responsible for submitting grading and identification information
into the central data base via the WAN and/or LAN may be required
to electronically agree to terms relating to their fiduciary responsibility
to accurately and honestly submit information to the carrier. The
lab and/or individual representative of the lab may be required
to possess complete livability insurance for both the lab and the
individual grader, which may contain but not be limited to errors
and omissions, malfeasance, bonding and any other form of insurance
deemed necessary by the carrier.
 The wholesaler may list the newly created and documented
product on both a closed dealer network at wholesale prices and
a consumer accessible website showing suggested retail prices and
available dealer locations. This data may be stored on the central
database and be accessible via a WAN (at step 36). The product is
sold to a dealer by the wholesaler (at step 38). Information pertinent
to the details of the sale, which may include an electronic terms
agreement accepted by the dealer and/or dealer's agent, is transmitted
to, and recorded in the central database (at step 40). The administrator
of the central database may then inform the insurance carrier of
the sale (at step 42). One or more insurance policies for the product,
as described above, may be issued and recorded in the central database
by the insurance carrier or the insurance carrier's administrator
(at step 44).
 The product is then available to a consumer from the dealer.
When the dealer sells the product to a consumer, the sale information
may be entered into the insurance policy form by the dealer and
registered in the central database (at step 46). This establishes
the effective date of insurance coverage. The administrator of the
central database may electronically notify all involved parties
as to the status of the sale and subsequent insurance coverage.
Written correspondence, which may be in the form of an electronic
message, may also be sent directly to the consumer, informing them
of the existence of coverage and the procedure for filing a legitimate
claim. As described herein, the premium for the insurance policy
on the products may be prepaid by the wholesaler. In this example,
the wholesaler may provide an estimate on a periodic basis (e.g.
quarterly) of the number of products it expects to ship to the insurance
carrier and the insurance carrier may then invoice the wholesaler.
Alternatively, the insurance premium may be paid upon shipment of
products from a wholesaler to a dealer. In yet another alternative,
the insurance premiums may be paid by the wholesaler automatically
upon registration of a sale to a consumer by a dealer. In each of
these examples, information on estimated volume of product, the
actual product shipped to retailers, or the sale of a product to
a consumer may be automatically disseminated to the insurance carrier
via the WAN when the wholesaler or dealer enters information into
central data server at the merchant 12 (see FIG. 1).
 The refund process may contain several steps. The dealer
may verbally inform the consumer, prior to the sale, of the written
policy concerning the refund process. For example, the dealer may
inform the consumer that the product is to be returned to the lab
for verification of authenticity and non-damaged condition prior
to the carrier issuing a refund. This process may normally take
approximately 10 to 15 business days before a refund check is issued
by the carrier. This process may be duplicated by the carrier's
administrator in writing via U.S. Mail and/or electronically following
the electronic registration of the product for insurance coverage.
 The consumer may then return the product to an authorized
dealer. The dealer may be the original dealer who sold the product
or may be another participating dealer in the event the original
dealer is no longer in business, contracted to represent the product
line, or the consumer has moved to another geographical area. The
dealer may have specially designed forms and packaging for giving
the consumer a proper receipt for a shipping package that will be
sealed in the presence of the consumer. A proper legal process for
verification of ownership, such as multiple forms of identification,
death certificate, certificate of sale from the original purchaser
to the new owner, may be used.
 If the product is mounted in a setting, it may be removed
by the dealer in the presence of the consumer. Otherwise, the set
product may be submitted intact as received from the consumer and
condition will be verified by the lab. The dealer may connect to
the WAN to notify the central database that a claim is being filed
and the product is being sent to the lab for authentication and
verification of re-salable condition.
 The dealer may then ship the sealed package containing the
product via overnight delivery or other insured service to the lab
that evaluated the product prior to the sale. These services may
include the U.S. postal service, registered or express mail, FedEx,
or UPS. Upon receipt of the sealed package, the lab may document
the receipt of the untampered package. Delivery may be refused if
the package appears to be tampered with, thus ending the insurance
claim process and referring it to the dealer who accepted the product
for the return (or the original dealer) for compensation via shipping
insurance. If this occurs, the lab may access the WAN to notify
the central database. In the event of a tampered package, notification
of denial of the claim with an explanation and recommended steps
for processing a shipping loss may be sent to the consumer, dealer,
wholesaler, administrator, and carrier by the central database administrator.
The notification may be sent via email using the WAN and/or via
U.S. mail or other delivery service.
 If the package has remained sealed, the lab may open the
package, retrieve the original electronic identification and quality
assessment documentation for the product being received, and use
this information for verification of authenticity, identification
and condition using both visual examination and various forms of
insurance carrier approved instrumentation. Upon verification of
an undamaged and authentic product, if the documentation provided
matches the original documentation, an electronic and/or written
notice may be sent to the dealer, the consumer, the wholesaler,
the central data base administrator and the carrier via the WAN
and/or other delivery service. This notice may indicate that consumer
claim will be processed for payment. If the product is damaged,
the lab may notify the central database administrator who may subsequently
send notices to all parties that the claim for insurance has been
denied due to condition, and that the product will be returned to
the dealer who accepted the product. This allows the consumer to
retrieve the product and proceed with other options such as property
 If the returned product is acceptable, the dealer may then
be given a limited period of time, for example a 5 business day
option, via the WAN from the central database administrator to exercise
one of the following options:
 1. Choose to keep the product in inventory with no future
insurance option and purchase the product from the insurance carrier
for the original retail value less the originally contracted liability
mutually agreed upon by the dealer and wholesaler. For example,
if the original dealer contract provided for the dealer to be responsible
for 50% of the gross profit margin, in the event of an insurance
carrier refund and the gross margin was 25% of the retail price,
tiie liability would be 12.5% of the retail price. Thus, the dealer
would pay the insurance carrier 12.5% of the original retail price
plus the original wholesale price less the original insurance premium;
 2. Choose to keep the product in inventory with a new insurance
contract for the next consumer purchase. In this event, the original
wholesaler may be required to fulfill their obligation to purchase
the product from the insurance carrier for the original wholesale
paid by the dealer less the original cost of insurance. The dealer
may, in addition, be required to reimburse the insurance carrier
for their originally contracted portion of the liability. The new
terms of purchase for the product from the wholesaler to the dealer
may be exercised based on the original dealer/wholesaler contract.
This might require that the dealer pay the current wholesale value
for the diamond inclusive of a new insurance fee at whatever terms
are mutually agreed upon by the dealer and wholesaler.
 3. Choose to decline future ownership of the product. In
this circumstance, the product may be returned to and sold back
to the original wholesaler or an alternative wholesale entity if
a higher price were offered. The dealer may, in addition, be required
to reimburse the insurance carrier for their originally contracted
portion of the liability.
 4. Exercise any of the above options, combined with a trade-in
by the consumer where the consumer pays the difference between the
current retail price of the new product less 100% of the price originally
paid for the returned item. In this case, the dealer may be responsible
for paying either the difference between the original wholesale
price and the new wholesale price, or 100% of the new wholesale
price in the event of option 1.
 In another embodiment, if the dealer elects to return the
product, the dealer's decision may trigger an automated auction.
The automated auction may include the merchant notifying a closed
network of the participating wholesalers and retailers for the purpose
of listing the returned product for sale to the highest bidder.
In one implementation, the product may be listed for 3 days and,
if left unsold, sold to the original wholesaler at the original
wholesale price. Since the product nas been inspected by the lab
for authenticity and condition it may easily be re-introduced into
the value assurance program. The dealer's initial decision to send
the product back to the wholesaler may be communicated electronically
to the merchant. Upon receipt of the communication, the merchant
computer may automatically post the product for auction and transmit
notices, via email for example, to the closed network of participating
wholesalers and retailers.
 Upon receipt of the dealer's preference by the carrier,
the carrier may procure payment for the product from the dealer
and wholesaler via electronic means (e.g. wire transfer, credit
card, etc.). Upon fulfillment of the financial contractual obligations
of the dealer and wholesaler to the carrier, the carrier may issue
a check to the consumer for 100% of the original purchase price
(sales tax not included). The refund check may be sent via U.S.
postal service certified mail or other delivery service. The dealer's
portion of any liability may also be collected by the wholesaler
according the mutual agreement, leaving the wholesaler responsible
for reimbursing the carrier for both the liability as well as that
of the dealer. Any failure on the part of the wholesaler or dealer
to pay their contracted share of liability may result in suspension
or revocation of their future insurance contract with the carrier.
The wholesaler may be responsible for all shared refund liability
payments to the carrier.
 As described, the supportable value product may be any of
a number of items that maintain or increase in value and can be
readily identified and authenticated. This may include, for example
and without limitation, collectibles such as antiques or, as recited
in the above discussion, loose gemstones such as diamonds. The diamonds
may be natural and/or synthetic diamonds or other gemstones. These
other gemstones, like diamonds, should be supportable value products
able to be consistently priced throughout the jewelry industry through
a set of standard characteristics. In addition, these gemstones
may not be subject to wholesale price fluctuations as large as other
gemstones, which limit exposures of the merchant and insurance carrier.
Moreover, as the guarantee covers gemstones returned in their original
condition, for customer satisfaction purposes the gemstones should
be durable enough such that a large percentage of the gemstones
do not get returned. In the case of products such as, but not limited
to, artwork, collectables & antiques, etc., they are usually
not worn and do not deteriorate in the fashion worn articles do.
If they are cared for properly they may be insurable in the same
manner as described above if they are both resalable and returned
in pristine condition.
 In one embodiment, the diamond price is calculated using
the characteristics of the diamond and weighting factors for the
characteristics, based on up-to-date information about the wholesale
costs of the diamonds, expenses of the merchant, and a slight markup.
In this embodiment, the markup is set by the merchant, who assumes
the risk of losing essentially the entire markup as well as any
expenses incurred if the diamond is returned. In other embodiments,
the merchant provides the diamonds and insurance to individual sellers
and gives a suggested price to the sellers. The sellers may sell
the diamonds for more than the suggested price, but assume the losses
for any amount over the suggested price. In one embodiment, each
seller signs a contract agreeing to refund the purchase price or
the price less any amount remaining to be paid to the owner and
the merchant will not be responsible for paying for the difference
between purchase price and the suggested price if the seller sets
the purchase price above the suggested price. Conversely, the carrier
may choose to only cover the amount the product is actually sold
for up to the suggested retail value. The carrier may choose to
insure the product for more than the suggested retail value with
an additional premium.
 Accordingly, a factor that may enhance the salability of
diamonds is an extended guarantee period. The extended guarantee
period may be implemented through a process of identifying quality
diamonds and negotiating insurance coverage via a reputable insurance
carrier. Diamonds are assessed for their light performance and are
uniquely marked using laser-inscribed identification in the event
of a return. All returns and exchanges are received through the
gem laboratory so they can be properly inspected for condition and
identity. The merchant determines whether to absorb the return into
inventory and pay the refund or forward the item at the direction
of the insurance carrier and authorize payment of a claim directly
from the insurance carrier. The merchant makes this determination
based on the current budget of the merchant at the time of return.
The insurance carrier may solicit a renewal of the coverage after
the initial term expires. In the event that a product is ordered
by a consumer or seller, the product is quickly prepared and shipped
to the customer if not immediately available and the various entities
(e.g. diamond supplier, insurance carrier, gem lab, manufacturer)
may be paid within one or two business days.
 It is therefore intended that the foregoing detailed description
be regarded as illustrative rather than limiting, and that it be
understood that it is the following claims, including all equivalents,
that are intended to define the spirit and scope of this invention.