The next time you file an insurance claim – or even simply make an inquiry about your coverage – prying eyes may find out, possibly resulting in higher insurance rates. That’s because claims and inquiries often end up in the Comprehensive Loss Underwriting Exchange database, commonly known as CLUE.
CLUE reports contain a history of losses on personal property experienced by an individual policyholder. Information found in a CLUE report includes:
• The date of a loss.
• The type of claim made.
• The amount paid out by the insurance company.
A company called LexisNexis issues CLUE reports. Such reports cover the past seven years of claims.
Insurance companies use information from the CLUE database – in addition to your insurance score (a numerical ranking based on aspects of your credit score) – to help determine the rate you’re charged for homeowner’s insurance or auto insurance. In other cases, an insurer may reject you as a customer based on a CLUE report.
For example, insurance company underwriters who look at your CLUE report and see you’ve made several car insurance claims over the past several years may view you as a higher risk for filing a claim in the future. As a result, you could be charged a higher premium to compensate the insurer for that risk.
Despite the importance of CLUE reports, many people are unaware of their existence, says Tena Friery, research director at the Privacy Rights Clearinghouse, a nonprofit that specializes in consumer privacy issues.
“The first step is to recognize that there is such a thing as a CLUE report,” she says. “That’s something that’s not really obvious to a lot of people.”
Catch a CLUE
CLUE reports, which are issued for both auto and home insurance, dominate the insurance industry. In fact, the term “CLUE report” often is shorthand for “loss history.”
A company called ISO also maintains another database known as the Automobile-Property Loss Underwriting Service (A-PLUS). A-PLUS is CLUE’s smaller competitor, and it also records information about claims you make on your auto insurance. Some insurance companies use either CLUE or A-PLUS when evaluating policyholders; other insurers use both.
Insurers use CLUE and A-PLUS data because statistics show a link between the number of claims a person has made and the likelihood that he or she will file claims again, Friery says.
Depending on your insurer’s policies, any claim you make is likely to end up in the CLUE database, the A-PLUS database or both.
In addition, sometimes a simple inquiry may be noted, even if you don’t file a claim. An example of such an inquiry might be a call to an agent to ask about coverage for mold or water damage.
“We have heard instances of people calling just to make an inquiry and a notation ends up in their CLUE report,” Friery says.
Bob Passmore, senior director of personal lines at the Property Casualty Insurers Association of America, a trade group, says each insurer weighs CLUE information differently when setting rates. He refers to this process as the company’s “secret sauce.”
“Every company has its own formula that they use,” Passmore says.
You can choose to have your insurance information omitted from CLUE and A-PLUS databases. However, you do have some protections that can ease the sting of these reports.
For example, according to the Privacy Rights Clearinghouse, some states prohibit insurers from using mere inquiries – as opposed to full-blown claims – when setting rates. Other states require you to be notified whenever information about you is submitted to CLUE or A-PLUS.
To find out more about your own state’s laws, contact your state insurance department.
Every consumer also has the right to see his or her CLUE report and to dispute inaccurate information. The law allows you to obtain one free copy a year. You can get this from LexisNexis. You also are entitled to a copy of your A-PLUS report. Get that at the ISO website.
If you find a mistake in your CLUE or A-PLUS report, take action. “Just like with a credit report, you can file a dispute to have inaccurate information corrected,” Friery says.
If you find a mistake in your CLUE report, contact LexisNexis at the address listed. LexisNexis has 30 days to investigate the matter. It then will report the result of its findings to you by mail. ISO also pledges to resolve disputes about information in A-PLUS reports within 30 days.
If the matter hasn’t been resolved to your satisfaction, you can submit a brief statement about the dispute that will appear in all future reports containing the disputed information.
How common are errors?
Robert Hunter, director of insurance at the nonprofit Consumer Federation of America, says errors in CLUE and A-PLUS reports can happen in the same way mistakes pop up in standard credit reports. For example, he says, one missed keystroke when information is being entered into the report can result in an inaccuracy.
If an error is found, Passmore says, policyholders can expect it to be cleared up relatively quickly. “Nobody wants to have a database full of inaccuracies,” he says.
Hunter agrees that it’s in everyone’s interest to correct errors. He says insurance companies rely on accurate CLUE and A-PLUS data to make important decisions and assign rates.
To file or not to file
Of course, the best way to avoid being hurt by CLUE is to avoid appearing in the database altogether. That means not filing claims if you can help it, Friery says. “Perhaps hold off on filing claims for smaller losses,” she says.
Passmore agrees that making fewer claims is the best way to limit damage from CLUE reports. One good way to discipline yourself in this regard is to raise your deductible, he says, which has the additional benefit of lowering your premiums.
Hunter encourages people to avoid filing claims for small dollar amounts. “It’s much easier – and in the long run, much cheaper – to pay these claims out of your own pocket,” he says.
By Chris Kissell, InsWeb.com