ChoicePoint Stops Data Mining

After meeting with representatives of the Independent Insurance Agents of America (IIAA), Alpharetta, Ga.-based ChoicePoint Inc., a credit scoring and consumer-lead generation service provider, agreed to stop selling data related to certain independent agency and broker insurance transactions.

Debra Perkins, executive vice president and general counsel of the IIAA, and C. Wesley Bissett, IIAA vice president of state relations and state government affairs, met with ChoicePoint officers Jan. 9. A few days later, ChoicePoint sent a letter to IIAA saying it would stop creating or using expiration dates from insurance quote and underwriting transactions that independent agents, or their companies, are required by carriers to submit to the firm.

IIAA first learned of ChoicePoint’s activity in August 2001. Perkins explained how IIAA first learned of what ChoicePoint was doing: “We became aware of it from two different agents, one of whom bought a lead list from ChoicePoint and determined that a number of leads on the list were names of consumers [about whom] the agent had made inquiries to ChoicePoint for credit scores and consumer reports. In essence, ChoicePoint took those consumer requests, developed shopping dates based on the data in the submission of those requests, put them on a list, and sold it back to the agent who’d submitted it.

“Another way was a follow-up that ChoicePoint did that requested feedback from agents about a variety of things,” Perkins continued. “Agents became concerned about whether or not any of the information would be used for other purposes. A series of phone calls ensued. As a result of the phone calls, ChoicePoint ultimately wrote a letter to the agent explaining its business practices, and that it wasn’t going to undermine the agent’s book of business. But with that, they inadvertently sent a series of internal e-mails that made clear that, in fact, they were developing shopping dates.”

ChoicePoint had generated lists of dates from data submitted by agents indicating when consumers’ policies would expire—when consumers would most likely be shopping for new coverage. The lists were then sold to other agents and companies.

Bill Aspinwall, personal lines chairman at IBA West, was extremely disappointed with ChoicePoint in generating the lists.

Aspinwall indicated it was a simple outrage that the company would do something like this, taking the private information and turning around and selling it to competitors.

Aspinwall noted that from both an agency and an association standpoint, it was imperative that the company state that it was not doing this anymore and that they would guarantee that they would not do that type of thing in the future.

According to Perkins, ChoicePoint held that since the company was inferring shopping dates based on dates of submissions from agents, it wasn’t doing anything wrong. “We felt that both the consumer names and the dates of the submissions… were of course agent-owned information that was inappropriate for someone else to trade off of without the agents’ permission,” she said.

At the Jan. 9 meeting, Perkins and Bissett talked with ChoicePoint’s executive vice president, chief privacy officer, and vice president of sales and marketing. The IIAA representatives listed several reasons for ChoicePoint to cease its activity, including the negative attention the company was getting from the agent community, and requests it was getting from insurers and agencies to renegotiate contracts so that data they submitted would not be used to generate lists.

“We talked with [ChoicePoint] about the attention this was getting from state associations, and the related issue of states wanting to take steps to protect agent-owned data going to legislatures,” Perkins said. “We talked about information from some agents considering filing litigation… We talked about implications it’s had under the Gramm-Leach-Bliley Act—that it was violative of that. So they considered all of those things as a result of our meeting
on Jan. 9 and sent us a letter on Jan. 14 in which they agreed to discontinue the practice on a forward-going basis, and also to purge data identifiable from agents in their existing database.”

James Lee, vice president of marketing at ChoicePoint, told Insurance Journal, “We still do not necessarily agree that the product itself was in any way compromising the competitiveness of the agents. But that’s really immaterial because at the end of the day, this is a customer issue—a customer service issue. There is, within the ranks of the insurance world, a disagreement over whether this kind of product is proprietary or not, but it doesn’t really matter because the customers were concerned about it, so we’ve changed the product.”

ChoicePoint’s letter to the IIAA stated, “It was clear from our discussions… that, although shopping dates are of value and desirable to their membership, the manner in which we were collecting them was too close to infringing upon the independent agent’s client relationship… ChoicePoint has built its business on managing and using data in a responsible fashion. We are hopeful that our affirmative response to your concerns further demonstrates our commitment to this business principal and to the independent agency market.”

“They put in the letter to us that they were going to purge that data immediately,” Perkins noted. “In the follow-up phone call I had with them, they made clear that the process to complete that would be taking place in the first week of February.”

Various insurance companies, including Progressive Insurance, MetLife Auto & Home, and MSA Group, expressed to IIAA their opposition to ChoicePoint’s selling of shopping dates. Some insurers also amended their contracts with the company to prevent it from using agent and broker information.

Just last month, ChoicePoint Inc. reported record results for its fourth quarter. Revenue from continuing operations increased 21 percent over the prior year to $164.6 million in the quarter. Net income was a record $23.2 million up 19 percent from last year and earnings per share (“EPS”) were a record $0.35 per share.

For the full year, revenues from continuing operations increased 17 percent over the prior year to $632.2 million. Full year EPS excluding non-recurring items were $1.27, up 25 percent from $1.02 in 2000. Including non-recurring items, full-year EPS were $0.77, up 11 percent from $0.69 in 2000.

According to Chairman and CEO Derek V. Smith, despite a challenging economy, by every measure—revenue, operating margin, earnings, cash flow—2001 was a record year for the company. Smith added that since going public in 1997, the company has delivered strong, consistent results.

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