If past history is any measure, many homeowners affected by the wildfires burning throughout Southern California will find that claims they submit to insurers will result in higher rates or even dropped policies.
What they, and you, may not know is that virtually all such claims also will end up in vast, privately run databases that are routinely accessed by the insurance industry to determine what rates they'll charge -- or if they'll cover you at all.
In other words, a claim filed with one insurer can be used by another insurer to jack up premiums, even though your record with that other insurer may be spotless.
Moreover, the databases don't just reflect all claims filed by individual policyholders. They also reflect claims filed for specific addresses.
This means a new homeowner potentially could inherit higher rates simply because he or she bought a house where someone else submitted claims in the past.
"It's patently unfair," said Amy Bach, executive director of United Policyholders, a San Francisco-based advocacy group. "It's like buying a haunted house."
The databases would appear to be particularly all-encompassing in a state like California, where claims -- past and present -- can involve just about every hazard imaginable, from brush fires to earthquakes.
Although the databases may help insurers make educated decisions about risks posed by potential customers, they also can be abused by insurance firms seeking any rationale for charging higher rates, Bach said.
"Why should supposedly competing companies get to access your history?" she asked. "Insurance requires a certain amount of risk on the part of insurance companies. That's just the way it is."
The databases don't just affect homeowners. They also contain data for vehicle-insurance claims.
The primary such database is called the Comprehensive Loss Underwriting Exchange, or CLUE. It's maintained by Georgia's ChoicePoint, the data broker that came to prominence in 2005 when scammers gained access to files on about 163,000 U.S. consumers.
Until the ChoicePoint debacle, many people weren't even aware that private companies compile and sell their personal information. Major clients for data brokers include government agencies, employers and financial institutions.
While ChoicePoint's CLUE dominates the insurance landscape -- to the extent that claims reports are often referred to as CLUE reports -- a similar database, the Automobile-Property Loss Underwriting Service, or A-PLUS, is maintained by a New Jersey company called ISO.
Jason Kimbrough, a spokesman for the California Department of Insurance, said state authorities were aware that such databases could be abused by insurance firms, increasing the chances that consumers "use it and lose it" when it comes to property coverage.
"CLUE certainly has use-it-and-lose-it overtones," he said.
Krissi Rouquie, ChoicePoint's assistant vice president of product development for CLUE, said the company believed its database wasn't being abused by insurers. But she said ChoicePoint can't know for sure.
"It's the carrier's responsibility to review claims and set rates," Rouquie said.
She said nearly all insurers contribute customer data to CLUE and that the system currently has about 40 million claims on file. This is done without the authorization of people making claims.
"These claims are the property of the carriers," Rouquie said. "They can contribute these claims to us."
She said there was nothing unfair about a homeowner potentially being charged higher rates for a previous homeowner's claims. An insurer will want to know about any past damage at the property.
But Rouquie acknowledged that CLUE didn't reflect any work a new homeowner may (and typically will) do to improve a property once a sale goes through -- an investment that theoretically should make the homeowner a better risk for insurers and drive rates lower.
"This is purely a loss history, not a repair history," she said.
A spokeswoman for ISO, the other leading claims-database compiler, declined to comment on the company's operations.
Many consumers are probably unaware that their insurer routinely shares sensitive information with the CLUE and A-PLUS databases, or that an "insurance score," similar to a credit score, is often given to people without their knowing it.
Since 2006, California has required insurers to notify customers that claims info may be shared with third parties. The disclosure is included with the fine print accompanying policies and claims forms, which few people might take the time to read.
It says, rather innocuously, that the insurer "reports claim information to one or more claims information databases" and that "the claim information is used to furnish loss history reports to insurers."
The reality is that such reports can have a significant effect on your rates and coverage, and that as much as seven years of a person's or property's claims history is available to virtually all insurers.
You're entitled to a free copy of your CLUE and A-PLUS files once a year. It's a smart idea to see what's there and whether your report includes any erroneous information.
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