Legislators CLUE in to Loss Reports

Among the many topics addressed by the property and casualty insurance committee of the National Confer-ence of Insurance Legislators (NCOIL) at its meeting in San Antonio Feb. 26 – 29, was the comprehensive loss underwriting exchange (CLUE) and its use in writing homeowners coverage.

A database developed around 10 years ago by ChoicePoint at the request of insurance carriers, CLUE has generated heated discussion over the years as to its benefit for consumers. The committee is considering what language, if any, to include in possible model legislation regarding the use of CLUE.

Jeff Skelton of ChoicePoint kicked off the discussion with an overview of what the CLUE database is and how it used.

“We sell this tool to the insurance industry for underwriting their business,” Skelton said. “It is in a general sense a repository of data about prior claims, or prior losses. We don’t tell carriers what to do with the information, we report the information to them and they make decisions using the tool.”

Skelton said that when carriers “request a report from us, we report only the last five years worth of information in the database… Consequently two-thirds of consumers have no homeowners CLUE report because they haven’t filed any losses with the carrier in the last five years.”

He said there are four criteria that are used to trigger the system. Those are:

1. A carrier has made claims payment to the consumer.

2. The consumer reports a loss and it is investigated, but the claim is denied.

3. The consumer reports a potential loss but doesn’t file a claim. However, the carrier records the loss, investigates the damage and incurs a loss adjustment expense.

4. The carrier logs a loss reserve adjustment on their books after being contacted by a consumer, but the consumer doesn’t file a claim. The carrier anticipates having to pay something at some point on that particular phone call and sets aside reserves.

Consumers can request a CLUE report online at choicetrust.com, or they may contact ChoicePoint if they “have been adversely impacted by the use of the information in the report,” Skelton said.

He noted that hypothetical questions from consumers to their insurance carriers, such as, “‘I saw my neighbor’s tree fall and hit their shed, if that happened would I have coverage for that type of thing?'” should not be reported to the CLUE database if no actual loss has occurred.

But Skelton’s scenario generated a round of intense questioning from Representative Craig Eiland of Texas. “If the tree then falls and hits my shed, and I call and tell my insurance company and say, ‘Hey the tree hit my shed, is it covered?’ And they respond, ‘Yes, it would be if it meets some sort of threshold.’ Does that get reported?” Eiland asked.

Skelton answered that it probably would be since “there’s probably going to be some costs incurred to investigate to see what it costs to repair the shed. …”

“… Even if I don’t pursue it any further, is it still reported on the CLUE report?” Eiland continued.

“I think in some cases it could very well be, yes,” Skelton replied.

“Yes?” Eiland asked. “Or could very well be? … It is reported?”

“I think you will find that some carriers will be more aggressive with consumers about making sure that they’re interested in pursuing the loss,” Skelton said.

“Calling for an inquiry is not the same as consumer seeking benefits under the policy,” Eiland noted as a final comment.

In the end the committee agreed that the use of the CLUE database warrants further consideration and decided to place the matter on the agenda for NCOIL’s summer meeting in Chicago.

Topics Carriers Profit Loss