Insurance companies conduct a risk assessment of each applicant and property requesting coverage. The risk assessment tells a company whether the risk presented by the applicant or property is acceptable to them based upon the company's underwriting guidelines and if acceptable, what the premium should be for the risk presented. The guidelines and premiums charged are based generally upon historical, statistical data. Statistically, it has been documented over time that individuals that have losses tend to have more losses. Therefore, knowing the previous loss history of the applicant and property helps the company in determining the level of risk presented and the appropriate amount of premium to charge for that risk.
Yes. It is generally recognized that insurance companies have a need to know about your previous loss history for underwriting and rating purposes. However, the law does restrict or prohibit the use by companies of some specific loss history information.
Yes. While all companies do not have the same underwriting guidelines or rating systems, generally, most companies today consider your loss history in determining whether to offer you insurance or not and in determining how much premium to charge you. Knowing the type and frequency of losses you have had is a part of their risk assessment of you.
Insurance companies use several methods to gather your loss history:
- All companies ask for your loss history information when making an application.
- Some companies may ask you to have your previous carrier send them your previous loss history.
- Some companies may request that an investigative consumer report is done to obtain your background history.
- Most companies will request a search of industry loss history databases for information about previous claims or losses.
North Dakota law requires that a company inform you at the time of application that they will consider your loss history in determining whether to decline, cancel, not renew or surcharge a policy.
No. The law is specifically limited to personal insurance which is defined to mean private passenger automobile, homeowner, motorcycle, mobile homeowner and owner-occupied dwelling fire policies.
Companies may not consider the following for purposes of surcharging, declining, nonrenewing or canceling personal insurance or a binder for personal insurance:
- An inquiry to your company about the level of coverage or whether a policy will cover a loss.
- An inquiry to your company regarding coverage for a loss if you never file a claim.
- A claim if the company does not investigate the claim or does not initiate any other claim activity (unless the claim involves deceptive practices by you).
- A claim if the company does not make a payment to you or on your behalf (unless the claim involves deceptive practices by you).
- A first-party property claim caused by wind or hail if you have not had any other wind or hail claims in the past five years (unless the company can show that you failed to maintain the property and the failure contributed to the loss). If you have had more than one wind or hail claim in the past five years, the company can use the second and third claims, etc.
- Any claim that is more than 10 years old (unless the company can show that you failed to maintain the property and the failure contributed to the loss).
The Comprehensive Loss Underwriting Experience (CLUE) is the acronym associated with the loss history database managed by LexisNexis. Another common loss history database used by companies is known as A-Plus and is managed by the Insurance Services Office. The CLUE report is a loss history report. This report will show all losses (claims) made by you (by social security number), made on a specific vehicle (by Vehicle Identification Number) or made on a specific property (by address).
Under the federal Fair Credit Reporting Act (FCRA), you are responsible for contacting the database manager of a contested loss history. You must then contact the company that made the erroneous entry and request that they have it corrected in the database. Once the correction is done, you may request the insurance company to reconsider your application.
You must get the insurance company that provided the incorrect information to the loss history database to correct the entry.
Maybe. The law strictly prohibits a company from using the previous owner's loss history on a property as the sole reason for declining to write a policy but does allow the company to refuse to insure if it can show the previous owner did not repair the damage. Also, if the company has other legitimate underwriting factors in addition to the loss history that supports the declination they may then do so.
North Dakota law allows companies 60 days to underwrite a risk. If a company finds within the 60 days that the risk does not met their underwriting eligibility criteria, it may terminate the policy and/or binder. If you are contemplating the purchase of a new home it is extremely important that you involve your agent as soon in the process as you can to avoid any unexpected problems with the insurance company providing coverage due to issues that may be discovered upon receipt of a loss history report.
Generally, companies use your previous loss history information in underwriting or rating your policy, including losses related to weather such as wind and hail. However, there are some provisions in state law which limit the use of this type of loss information in certain circumstances. For example, companies can not use the first wind/hail loss in the previous five years to underwrite or rate auto and homeowners policies but may use subsequent losses within the five-year period.
In addition, the law prohibits companies from surcharging your auto policy based upon a comprehensive loss of any kind. This restriction is specific to surcharging but does not prevent them from nonrenewing your account based on this information subject to the five-year rule for wind/hail losses.
"No-fault" coverage on your auto policy pays for an accidental injury you might sustain in your moving auto regardless of who is at fault. Some companies do count a "no-fault" claim payment as a loss on your account if it reaches a certain dollar threshold.
To access a copy of your Comprehensive Loss Underwriting Experience (CLUE) report, please contact LexisNexis.
To access a copy of your A-Plus report, please contact Verisk.