You Revealed: CLUE reports give insurance companies insight into
your claim history
By MICHELE DERUS
Milwaukee Journal Sentinel
July 19, 2003
Insuring motorists and homeowners against losses is always a gamble, but
insurance companies are improving their odds by studying CLUEs.
are financial reports on people and properties generated by a national
insurance industry databank called Comprehensive Loss Underwriting Exchange,
The system contains a five-year history of claims and
payments, along with records of inquiries concerning coverage, said Chuck
Jones, director of external communications for ChoicePoint Asset Co., the
Alpharetta, Ga., data management firm that runs CLUE.
decisions at the point of sale, detects and deters fraud and insures a fair
rate structure so homeowners with few claims don't pay as much as homeowners
with a history of numerous claims," Jones said.
paying more these days. Hit by $7.9 billion losses in 2001 -- which the
Insurance Information Institute of New York City attributes to the Sept. 11
terrorist attacks, economic recession and uncommonly heavy catastrophic
losses -- insurers responded by increasing premiums. Since 2001, rates have
climbed 17% for homeowner policies and 17.4% for auto policies, institute
To better align customer risk with insurance cost, more
than 90% of insurers use CLUE's database of 170 million auto loss claims and
40 million homeowner loss claims.
With a CLUE report, insurers can
spot the kind of people who policy-hop for personal gain, said Eric Englund,
president of Wisconsin Insurance Alliance in Madison. He characterized them
as the type who report to five different insurers in five years "that
somebody just happened to kick in the back car window and grab a $2,500
state-of-the-art laptop computer."
Such patterns used to be hard to
decipher, said Joseph Annotti, vice president of public affairs for the
National Association of Independent Insurers in Des Plaines, Ill. "Before
CLUE, a prospective insurance company would have to ask the current insurer,
'What's the loss history on this property?' and then go through public
records, a long and somewhat expensive search. Now you can get accurate,
immediate information," he said.
Along with a boon to insurers, CLUE
is billed as a guide to home inspectors, a consumer benefit for home buyers
and a marketing tool for home sellers -- at least, home sellers with a clean
claims record. Anybody with property or a driver's license can order his or
her own CLUE report, Jones said. The ideal report is very, very brief.
"Sixty-seven percent of insurance customers have no claims on their
reports," Jones said. That leaves the other 33%, and those who act on their
behalf, wondering how damaging this information may be.
It can be
tantamount to a blacklist, according to Doug Heller, senior consumer
advocate for the Foundation for Taxpayer and Consumer Rights, a non-profit
public-interest group in Santa Monica, Calif.
basically becoming the private version of Big Brother. The information they
keep on you is very personal and detailed -- about your credit history, auto
claims and accidents, homeowner claims, including thefts, pipes that burst
or hurricane damage, any number of things, including liability claims
against you," Heller said.
Among the consumer horror stories Heller
has collected is that of a homeowner who consulted his insurance agent after
his dog bit a neighbor. Although the victim didn't seek damages, and the dog
was euthanized, the man's insurance company did not renew his policy, and
other insurers rebuffed him.
"And he never even filed a claim!"
Nor did Heller and his wife, who recently purchased a
home in Los Angeles only to find out the house had a blot on its CLUE
record: a theft during the previous owner's tenure.
"We expected to
pay about $650 a year (for insurance). The first and second company we
contacted wouldn't insure us, the third quoted a $1,200 premium. We were two
days away from closing, in danger of falling out of escrow, so we finally
took what we could get, and it cost about $900," he said.
ChoicePoint's Jones doesn't buy all of Heller's story. While his firm does
gather credit information on people, it doesn't include that information on
CLUE reports, he said. Also, CLUE reports are designed for new customers --
"your insurer already has all the information it needs on you" -- so if a
customer's policy isn't renewed, it's for other reasons, he said.
Jones challenged the skeptical to check their own CLUE reports, available
for $9 by mail or $12.95 online -- free to people refused coverage based on
CLUE information. Under the federal Fair Credit Reporting Act, consumers may
challenge what's reported about them and win corrections or at least an
addendum summarizing their challenge, he said.
The system is weighted
against consumers, in Heller's view. Even innocuous general inquiries count
against them, he charged.
"If you simply inquire about coverage to
your insurance company, it may be listed and in fact is quite often listed
as a claim," he said.
That's true, Jones acknowledged. CLUE reports
don't have a category for general inquiries, so some insurance agents
instead report them as claims with no payout.
A bad CLUE report
received early in a housing transaction becomes a negotiating point, said
Debbi Conrad, legal services director for Wisconsin Realtors Association in
Madison. But a bad CLUE report received belatedly can foul a deal, she said.
Adverse information about a house is supposed to be revealed on seller
disclosure forms, Conrad said. But even candid sellers can be embarrassed by
CLUE revelations since "the report tracks other insurance claims not even
related to the home, even auto claims and umbrella liability," she said.
Buyers can be sandbagged by CLUE disclosures as well. Sometimes insurers
have pledged coverage, called an insurance binder, at a house closing
session only to renege after reviewing the CLUE report, Conrad said.
Because ChoicePoint's Jones said the firm won't sell CLUE reports to anyone
who doesn't own or is considering insuring the property, Conrad thinks
prospective buyers should request one. "I'd ask for it when I first visited
the home," early enough to deal with problems or scrap any notion of an
offer to purchase, she said.
Conrad advises homeowners to obtain CLUE
reports on themselves before listing their property, noting: "If you know
you never called your agent, or had a claim in the last five years, you have
nothing to worry about." To obtain a copy of your CLUE report, go to
www.choicetrust.com or call ChoicePoint - (866) 527-2600.
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