The Property Casualty Insurers Association of America (PCI) told lawmakers during a panel discussion that efforts to limit insurers’ access to loss history information on properties are unnecessary and harmful to both consumers and companies at last week’s National Conference of Insurance Legislators (NCOIL) annual meeting in Chicago.
“CLUE reports provide insurers with the vital information they need to accurately assess the risk associated with insuring an individual home,” said Rey Becker, vice president of personal lines for PCI. “Placing restrictions on the information that can be reported to the CLUE database places insurers at an unfair disadvantage – essentially making them cover a property, without having all the facts on which to price the policy.”
Becker told the NCOIL audience that efforts by Realtors to limit what goes into a CLUE report is also a disservice to homebuyers. “One potential consequence of this Realtor-inspired legislation that we’ve seen in numerous states is to essentially allow property owners and applicants for insurance to conceal potentially material defects in the property from insurers – even though a home buyer is legally entitled to such information. If the homebuyer has the right to know about problems with the property before closing the sale, why shouldn’t the insurer be able to find out before they are misled into covering a bad risk?
“Under the terms of some of the bills and regulations we’ve encountered in the past 18 months, even if insurers can see the relevant claim history in the CLUE report, they are essentially prohibited from considering it and forced to insure a potentially bad risk. The long-term result will be that many responsible homeowners end up paying higher premiums to subsidize other property owners who fail to adequately repair and maintain their property.”
There are two primary loss history databases relied upon by insurers. CLUE reports (Comprehensive Loss Underwriting Exchange), a product of ChoicePoint Asset Co., and A-PLUS (Automobile-Property Loss Underwriting Service), a product of Insurance Services Office, Inc. (ISO), provide claim information reported by participating insurers. The reports include prior losses reported by the applicant, or, in the case of property, reported on the insured dwelling address. The typical loss history report also includes general information about the insured such as name and birth date, as well as current and previous addresses. Loss history information includes a list of all claims made in the last seven years, including the date of the claim, the name of the insurance company involved, policy number, claim number, address, cause of loss, amounts paid, status of the claim, and the name of the insured and the claimant.
Companies use loss history reports for evaluating potential customers, generally upon receipt of a new business application. Only insurance companies that provide information to ChoicePoint or ISO on claims made by their current policyholders are allowed to access the databases that contain the claims information from all other participating providers. Currently, approximately 90 percent of American insurance companies participate by providing claim information to one or both vendors. The release and use of the database information falls under the provisions of the federal Fair Credit Reporting Act (FCRA).
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