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| CLUE and You:
Does this sound implausible? Think again. A claim on your homeowner's policy or information that seems to have no bearing on your driving ability can make your premiums skyrocket. Worse, your insurance might even be cancelled. Claims you file - sometimes even inquiries about your coverage that do not result in a claim - can appear in a little-known database called CLUE or its smaller competitor A-PLUS. And your insurance "score," which is largely based on your credit rating, can determine how much you pay for homeowner's or automobile insurance. If you've seen your CLUE report and know your insurance score, chances are you've already been turned down for automobile or homeowner's insurance. But probably you, like most others, are clueless about CLUE. The CLUE report and the insurance scoring system are tools insurers use to decide your risk profile, that is, how likely you are to file a claim against your policy. Insurers feed information about paid claims - perhaps even your inquiries about coverage that do not result in a claim - into a national database for use by insurers. Information included in the database, along with your insurance score, makes up your risk profile. Insurers use the profile to decide whether you get new insurance. At renewal time, your current insurer will probably review your claims history as well as your current insurance score to set your premiums - even to decide if you get to keep the insurance you have. When you shop for new insurance, the company may order a CLUE report. If information is inaccurate, you can be left without insurance while you work to correct the errors. Many states have recently passed laws to address consumer concerns about CLUE reports and use of insurance scores. Some laws prohibit use of inquiries that do not result in a claim. And some states now require notice when an insurer provides information to a claims database. The subject has become so controversial that the National Association of Insurance Commissioners, as of this writing, is considering a model state code. To learn more, see www.naic.org/committees_d_claims_history.htm. For information on your state's laws, connect to your state insurance commissioner at www.naic.org/state_web_map.htm. This guide describes property loss databases, insurance scores, how insurers use these predictive tools, your consumer rights, and how you can get a copy of your CLUE report and scores. We also explain your new rights to free reports. (See Part 7 below for more on free reports.) The CLUE database enables homeowner and automobile insurers to exchange information - without notice to you unless your state requires notice- about claims for loss of property. Here's a simple example of how the exchange system works:
The CLUE report also shows the new insurer information about claims you filed under your previous insurer's policy, although nothing filed more than five years ago. CLUE might also include information about inquiries you make, even if a claim was never submitted or paid. To find out if this practice is prohibited in your state, contact your state insurance agency. You can find contact information at www.naic.org/state_web_map.htm Who maintains this database?The major issuer of CLUE reports is ChoicePoint, a Georgia company that is one of the country's biggest compilers and sellers of personal consumer data. A property loss database is also maintained by Insurance Services Office (ISO) which calls its database the Automated Property Loss Underwriting System, or A-PLUS. However, because ChoicePoint dominates the insurance risk market, reports of property loss have come to be known generically as CLUE reports. Are CLUE reports only for homeowner's insurance? No. CLUE reports can cover property loss claims made against automobile insurance policies as well as homeowner's insurance. Automobile and homeowner's claims are maintained in separate databases, and CLUE reports are issued separately based on the type of insurance. Problems experienced by consumers in the homeowner's insurance market because of errors in CLUE reports have received media attention lately, contributing to the perception that CLUE reports only pertain to homeowner's insurance. In addition, many consumers who are taking advantage of the booming real estate market of late have discovered, often at the eleventh hour, that the property they want to buy or sell comes with its own CLUE report. Reports of water damage included on a home's CLUE report, for example, could blacklist the property, even if the owner never filed a claim and even if the real estate market is hot. Worse, the seller or buyer is not likely to know about errors in the report until the deal falls through. We discuss these situations in Part 3. What does a CLUE report say about me? The CLUE report includes personal information such as your name, date of birth, and Social Security number. Tied to your identifying information is a record of any auto or homeowner property loss claims you have submitted to an insurance company for the past five years, including:
The CLUE database may also include notations of property "damage" - even if the insurance company didn't pay out a cent. Any hint of water damage to a property, for example, is likely to trigger a negative mark on the property's CLUE report. Well-intentioned consumers who call an insurer to merely inquire about coverage for water damage have been shocked to have their insurance cancelled. Your chance to get new insurance at a good rate could be affected. (Note: Your state may not allow reports to include inquires that did not result in a paid claim. California has such a restrictions (CA Insurance Code 791.13(c). Contact your state insurance commissioner to find out what applies in your state. www.naic.org/state_web_map.htm) How long does information stay on the CLUE report? Five years from the date the loss is reported. This may include losses for a property before you owned it. Is my credit history included in a CLUE report? Only information about property loss claims made against homeowner's or automobile policies is included in the CLUE database. Information from the CLUE database plus your risk score make up the complete insurance risk profile. However, your credit history can play an important part in an insurance company's judgment about your risk potential. For more on your credit history and insurance, see Part 4 about the insurance scoring system. Why do insurers use CLUE reports? CLUE reports are a way for insurers to share information about your record of filing insurance claims. Insurance companies are by nature in the business of assuming risk. The more that a company pays in property claims, the less it profits. CLUE reports are one of the ways an insurer assesses how much of a risk it is assuming by selling you an insurance policy. The theory is that an individual's history of filing insurance claims is a good indicator of how likely that person is to file future claims. Taken to the extreme, this process of risk analysis translates to "use it and lose it. " If you file a claim against your policy, report damage without filing a claim, or even inquire about your coverage, you may not get new insurance at a good rate - or at all. What's wrong with CLUE? Because CLUE is generally unknown to the public, consumers have little opportunity to prepare for an insurance review. Inaccurate or incomplete data included in a report is likely to surface only after you have been turned down for insurance or premiums for new insurance skyrocket. At this point, you, the consumer, assume the burden of proving the data wrong. Here are some of the problems that lack of knowledge about CLUE reports can create for you:
For some real-life horror stories told by homeowners who have experienced such problems, see the next section, Part 3. Part 3. CLUE Reports: Laws, Flaws, and Horror Stories The federal Gramm-Leach-Bliley Act (GLB) requires financial institutions, including insurance companies, to send you an annual notice about how they collect information about you and how the company shares your data inside and outside the company's corporate structure. (For more on GLB and the required annual privacy notices, see PRC Fact Sheet series 24, www.privacyrights.org/financial.htm.) However, the annual privacy notice you receive from your insurer will not - and does not have to - explain that:
Since the insurance industry is regulated by the states, the content of an insurer's privacy notice is mandated by your state's insurance commissioner. The web site of the National Association of Insurance Commissioners provides contact information for your state's insurance commissioner, www.naic.org/state_contacts/sid_websites.htm. To our knowledge, no state requires insurance companies to disclose the sharing of information with the CLUE database in the annual GLB privacy notice. However, your state's insurance laws may require a separate notice when claims information is provided to a national database. For example, the California legislature recently passed a law that requires notice as of July 1, 2006. (AB 1640.). As of this writing, the bill has not been signed by the Governor. Why doesn't my insurer's privacy notice have to tell me about CLUE?The privacy notices required by GLB must explain what information your insurance company shares with (1) affiliated companies and (2) outside companies, called third-party non-affiliates. However, the information that goes into the CLUE database does not fall into either of these categories. Instead, information about your claims and damage reports goes to an information reseller, called a "consumer reporting agency" under the federal Fair Credit Reporting Act (FCRA). (15 USC §1681a(f)) The reseller acts as an information exchange, obtaining data about you from one or more sources, compiling the data into a report, and reselling it to another insurer. Because CLUE falls outside the provisions of the GLB's notice requirements, the insurer doesn't have to tell you it shares your information with the CLUE database. Why do CLUE reports fall under the FCRA ? Most people believe the FCRA just covers credit reports issued by Experian, TransUnion, and Equifax, the three national compilers of consumer credit data. However, this is a grave misunderstanding. The fact that consumers have rights at all when it comes to reports other than credit reports is usually only brought to light when there is a problem. Because consumers aren't aware of CLUE, they are not likely to take preventive measures to ensure accuracy. The FCRA sets the standard for the CLUE report just as it does for credit reports. CLUE reports fall into the FCRA definition of "consumer report," that is, a report bearing on your "credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living." (15 USC §1681a(d)(1)) ChoicePoint, the major provider of property loss reports, is a "consumer reporting agency" under the FCRA. That's because ChoicePoint "regularly engages in . the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing reports to third parties, and . uses . interstate commerce for the purpose of preparing or furnishing consumer reports." (15 USC §1681a(f)) Under recent amendments to the FCRA, companies that compile insurance claims reports have been further defined as "nationwide specialty consumer reporting agencies." Specialty agencies are required now to give you one free file disclosure every 12 months. For more on how to get your free reports, see Part 7 of this guide. Does the FCRA give me any rights? Yes. When it comes to your CLUE report, you have the same rights as you have for your credit report. In a nutshell, you have the right to access your report and to dispute inaccurate or incomplete information. You are also entitled to notice about an adverse decision based on information in the report. For more on your rights, see Part 5 of this guide. Can an insurer get my credit report from a credit bureau? Yes. Access to credit or other consumer reports for insurance purposes is allowed by the FCRA. This means the insurer can go directly to Experian, TransUnion, or Equifax to get your credit report. Credit information is also available to insurers through other consumer reporting agencies such as those that calculate insurance scores. See Part 4 for more on scores. Can I opt-out of the CLUE database? No. The opt-out choice you have under GLB does not allow you to opt-out of information sharing with consumer reporting agencies, one of which is ChoicePoint. It's the same situation that prevents you from opting out of having your bank share your loan information with the three major credit bureaus - Experian, TransUnion, or Equifax. You don't get a choice. Do any other laws cover CLUE reports? State laws that supplement the FCRA for consumer reports also apply to CLUE reports. California has such a law, the Investigative Consumer Reporting Agencies Act. (California Civil Code §1786 et seq.) The California law goes beyond the FCRA in protecting consumers who are the subject of employment reports. However, for insurance customers, the protections only apply if the report is based on personal interviews. This is a shortcoming of the California law. (Civil Code §1786.2(c); Insurance Code §791.02(n)) Will I get a warning from my insurer when there's a problem with my CLUE report? Unlikely. Most consumers find out about insurance practices and the CLUE report the hard way. Below are some examples of unfair insurance company practices and the CLUE report told by the California Insurance Commissioner at a 2003 press conference, (August 4, 2003, #093) www.insurance.ca.gov/docs/FS-News.htm:
Before deciding whether to sell you an automobile or homeowner's insurance policy, an insurer above all else wants to know how much of a risk you are, that is, how likely it is that you'll file a claim. Not even insurance companies can predict the future. Instead, to determine your risk profile, certain characteristics or criteria about you are given a point value. Some things such as a solid credit record add points to your score and some things like a bankruptcy mean points are taken away. Each characteristic is based on a statistical model from past experience to determine how likely an event is to occur in the future. Points given to each factor in the statistical model add up to your score. What factors go into my insurance score? Scores for both automobile and homeowner's insurance are based primarily on credit reports and public records information. This means a record of late payments can increase the amount you pay in insurance premiums, or a poor credit history can even mean you don't get insurance at all. Some insurance companies develop their own statistical model of the insurance score, which may include loss data as well as credit data. Credit reports usually include information on public records related to financial matters. Here are some of the public records filings that can have a negative impact on your insurance score: bankruptcies, foreclosures, tax liens, civil judgments, garnishments, and civil lawsuits. For information on the range of scores as well as frequently asked questions about insurance and homeowners scores, see www.choicetrust.com/servlet/com.kx.cs.servlets.CsServlet?channel=welcome&subchannel=insscore.What does my credit history have to do with my driving ability? It's a fair question to ask: "What does my history of paying bills on time have to do with the rate I pay for auto or homeowner's insurance?" After all, insurance is not like a loan. If you don't pay the premium, your coverage is dropped. To justify their scoring systems, insurers rely on statistical analyses that they claim show a direct correlation between a person's credit history and the likelihood of filing future insurance claims. But is it fair to rely on credit reports to set insurance premiums? And does the insurance industry discriminate against some segments of society like low-income consumers in so doing, in violation of state and federal equal opportunity laws? Many states have recently passed laws to prohibit or otherwise limit the use of credit factors as the sole basis of insurance rate determinations. For a list, visit the web site of the National Association of Mutual Insurance Companies (NAMIC), www.namic.org/reports/credithistory/creditlaws.asp. In a recent legislative session, California lawmakers tried once again but failed to limit credit history as a risk factor for insurance. However, two new insurance laws will give Californians new rights in the future. See Part 6 for a summary of the new California laws. In addition, the Fair and Accurate Credit Transactions Act (FACTA), requires the Federal Trade Commission and the Federal Reserve Board to study the effects of credit-based insurance scores and report to Congress by December 4, 2005. To read more about this study as well as public comments from consumers and industry representatives, see the listing of studies on the FTC's FCRA section. www.ftc.gov/os/statutes/fcrajump.htm Is my insurance score the same as my FICO score? No, they are different but the concept is the same. FICO stands for Fair Isaac Corporation, the company that pioneered the development of scoring tools to determine credit risk. The FICO score is a risk calculation based on your credit history that is used by lenders to predict how likely you are to repay your mortgage or car loan. Insurance scores are also based largely on credit history, but the characteristics fed into the insurance score are supposed to predict how likely you are to file an insurance claim. Therefore, the criteria that goes into the score, is tailored to risk of filing a claim, not repayment of a debt. Consumers are now becoming more educated about the factors that make up a credit score. The insurance scoring process is still largely a mystery to most consumers. However, insurance scoring, especially the potential for discrimination, is a "hot button" consumer issue being debated at both the federal and state fronts. For more on FICO scores and how to get your score, see www.myfico.com. Is there a standard score model used by all insurance companies? No. Scoring models have been developed by ChoicePoint and other scoring vendors. Fair Isaac, the company that leads in credit scoring, has also developed an insurance scoring model, Inshore, marketed to insurers through the national credit bureau Equifax, www.equifax.com. Many insurance companies have developed their own scoring models. It is a good idea to ask your insurance agent what scoring model the company uses. The criteria insurers use can vary from company to company. Some companies, for example, may consider your choice to live without credit a negative factor. Without a credit history, you may not have an insurance score. Lack of a score can in turn affect your ability to get insurance at a fair price. A brochure produced by the State of Alaska includes further information about the insurance scoring process. www.dced.state.ak.us/insurance/pub/consumer_brochure.pdf#search='insurance%20and%20score' Additional information about ChoicePoint's role in insurance scoring as well as the company's codes for various factors included in the score can be found at www.choicetrust.com/servlet/com.kx.cs.servlets.CsServlet?channel=affected&subchannel=creditreport
When it comes to the CLUE report, you have the same rights as with your credit report:
How can I file a complaint about an insurance company? Insurance is regulated by states, and each state government has an insurance commissioner. You should file a complaint about an insurance company doing business in your state with your state insurance commissioner. The web site of the National Association of Insurance Commissioners enables consumers to contact the insurance commissioners in each state in order to file a complaint. Its Consumer Information Source is found at www.naic.org/cis/fileComplaintMap.do. California consumers may file a complaint by calling the Insurance Commission's consumer hotline (M-F, 8 a.m.-5 p.m.), (800) 927-HELP (800-927-4357). You may also want to file a complaint about the CLUE or A-Plus report. For example, perhaps you were not able to correct inaccurate information even though you filed a dispute and provided evidence of the inaccuracy. In such cases, you should complain to the Federal Trade Commission (FTC) at www.ftc.gov. The FTC is the government agency that oversees consumer reports like CLUE and consumer reporting agencies that prepare such reports. You should also complain to the FTC if your insurer did not give you the appropriate notice of adverse action required by the Fair Credit Reporting Act. For more on the insurer's obligation to give you a notice of adverse action, see the FTC publication "Consumer Reports: What Insurers Need to Know," www.ftc.gov/bcp/conline/pubs/buspubs/insurers.htm. What is the difference between a "complaint" and a "dispute"? A complaint is made to a government agency that oversees a company or its activities. State insurance commissioners oversee insurance companies. Thus, a complaint about the insurance company's practices should be made to your state insurance authorities. You may also file a complaint with the FTC. This federal agency gets involved when insurance companies use consumer reports such a CLUE reports that are governed by the FCRA. The FTC has authority over insurance companies that use consumer reports as well as companies that issue the reports. You may also file a complaint directly with an insurance company. A dispute is a formal process outlined in the FCRA. The law requires a consumer reporting agency to investigate your claims of inaccurate information included in a consumer report. How do I file a dispute? Here's an example of how the dispute process works:
The dispute process under the FCRA is detailed in section 611 (15 USC §1681i). The consumer reporting agency upon receiving your dispute:
To read the full text of the dispute process, see section 611 of the FCRA, at www.ftc.gov/os/statutes/050131fcra.pdf. The ChoicePoint web site also provides information about disputes filed with that company. www.choicetrust.com/servlet/com.kx.cs.servlets.CsServlet?usertype=a In May 2003 the California Insurance Department reported a four-fold increase in consumer complaints over the previous year. www.insurance.ca.gov/docs/FS-News.htm Non-renewal of homeowner's coverage and insurers' use of CLUE reports accounted for many complaints. Consumers were penalized for calling their insurance company to simply ask about coverage, even if they never filed a claim. Consumers were also left in the dark about why insurance was cancelled or premiums were raised. Two new California laws address these problems. An amendment to Section 791.12 of the California Insurance Code (AB 1049) says an insurance company cannot base an adverse decision on the fact that a consumer inquires about coverage when the inquiry does not result in the filing of a claim. This applies to residential fire or property insurance policies, that is, homeowner's insurance only. The law is effective January 1, 2004. For individuals in states other than California, to find out if your state prohibits inquiries that do not result in a claim, contact your state insurance commissioner. www.naic.org/state_web_map.htm Another bill that became law in 2003 (AB 1191) gives consumers new rights to receive notice when insurance is cancelled, coverage is limited, or premiums are increased. (California Insurance Code 678, 679.9) Insurers already have to send you a notice 45 days before your policy expires, offering to renew the policy or informing you the policy will not be renewed. Starting March 2004 the insurance company must explain itself more clearly. If your coverage is limited - for example, the company says water damage will no longer be covered - or if your policy is cancelled, the company must explain the reasons why. The company must also tell you how to contact its consumer complaint section and the California Department of Insurance. If your premium is changed, the insurer has 15 days to tell you:
This is not automatic. If your premium changes, you have to ask for the above information. Starting July 1, 2006, an insurer in California must send you a notice if the company reports claims history to a claims database such as CLUE. (AB 1640, amending CA Insurance Code §791.28) As of this writing, the Governor has not yet signed this bill. You are entitled to free reports in one of two ways:
What does "adverse action" mean? There are a number of situations where an insurance company might make an "adverse" decision, triggering your right to a notice and free copy of your report. Here are some examples:
When can I get my free CLUE report? The right to a free CLUE report every 12 months became effective December 1, 2004, as a result of amendments to the FCRA, known as the FACT Act. Even if you have received a free report because of an adverse action, discussed above, you still have the right to receive a free report under the FACT Act. For more on your right to CLUE and other specialty reports, see PRC Fact Sheet 6b, The Other Consumer Reports: What You Should Know about Specialty Reports, www.privacyrights.org/fs/fs6b-SpecReports.htm. For information on how to get your free claims history or CLUE report from ChoicePoint, see www.choicepoint.com/factact.html or call (866) 312-8076. For information on how to order your free A-Plus Report from ISO, see www.iso.com/products/2500/prod2562.html or call (800) 627-3487. Keep in mind that insurance decisions may also be based on your credit history. Note: The FACT Act only entitles you to a free copy of your claims report, not your insurance score. For this reason, it is a good idea to exercise your right to free credit reports as well. As of September 1, 2005, consumers in all parts of the country are entitled to one free credit report from each of the three national credit bureaus. For more on ordering your free credit reports, see PRC Fact Sheet 1, Privacy Survival Guide: How to Take Control of Your Personal Information, www.privacyrights.org/fs/fs1-surv.htm. See also the FTC's guide to free annual credit reports, www.ftc.gov/bcp/conline/edcams/freereports/index.html. Part 8. Tips for Insurance Consumers
How to Get Your Free Insurance Claims ReportYou are entitled to one free report in any 12-month period under the federal FACT Act. If you want additional reports from either ChoicePoint or ISO during the 12-month period, you could be charged a fee. Most likely, however, the reason you want a report will be because of an adverse action taken by an insurance company based on the information in the report. In this situation, you are entitled to a free report as discussed above in Part 7.
Laws
Insurance Organizations and State Insurance Agencies
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| Copyright © 2003-2007. Privacy Rights Clearinghouse/UCAN. For distribution of this fact sheet, see our copyright and reprint guidelines. This copyrighted document may be copied and distributed for nonprofit, educational purposes only.The text of this document may not be altered without express authorization of the Privacy Rights Clearinghouse. This fact sheet should be used as an information source and not as legal advice. PRC fact sheets contain information about federal laws as well as some California-specific information. Laws in other states may vary. Overall, our fact sheets are applicable to consumers nationwide. Privacy Rights Clearinghouse, 3100 - 5th Ave., Suite B, San Diego, CA 92103. Web: www.privacyrights.org |
