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TOO MANY CLAIMS
Having even a few bad marks on your insurance can
result in increased rates, or even worse, a cancelled
policy.
In the last three years, 3.5 million households were
informed by their carriers that their policies were not
gong to be removed.
It has always been very common for insurance companies
to keep records of all of the claims filed by their
clients. But now, there are several specialty companies
that enable information to be dumped into databases and
shared with other insurance companies, similar to
credit reports.
This is the process: When you file a claim with your
insurance carrier, they will pass the necessary
information to another company which will put the
details into their database.
ChoicePoint Services and
Insurance Services Office
Inc. are the two main providers of this service. In
return for their cooperation, insurance company's are
granted access to the information in the database.
Insurance companies are able to check out the history of
an individual or an address by running either a CLUE
(for Comprehensive Loss Underwriting Exchange) or A-PLUS
(Automobile-Property Loss Underwriting Service) report.
Claims will remain in the database for five years. Over
90% of insurance companies participate in claims sharing
databases.
When you
purchase a home, it is very likely that any
potential insurer is going to run you and your home
through the system. If either has too many claims
associated with them, you will likely incur higher
rates, if you can obtain insurance at all.
The insurance industry views this as a strong tool for
correctly assessing a person or property as a risk and
to confirm that an applicant's information is correct.
More simply put, it's a method of making sure the price
is closely related to the risk they are dealing with.
As with every system, this one has flaws.
The National
Association of Realtors has noticed that there are
differences in the way insurance companies handle -- and
record -- the same circumstance. Company A will handle a
claim differently than company B.
In addition, there have been concerns that an individual
making a call to their carrier, but not filing a claim,
will have this action be reported as a claim in the
databases.
Also, when incidents are reported but not paid, either
because the policy holder decided to pay it themselves
or because the claim does not exceed the deductible or
is denied, they still go into the database. These
instances are called 'zero-payout' claims.
It is safe to say that if you contact your agent to fix
something, you are going to be considered to be making a
claim.
These databases are only one small portion of the
underwriting procedure. The root of the issue is that
it's a hard insurance market and their rules have
changed. Companies have become very detailed in their
underwriting. They want to make sure the their price
matches the risk.
Buying and
selling a home
Statistics indicate that homeowners file a claim
about once every 7-10 years.
However, the limit for what's acceptable before a
company decides to raise rates or chooses to not renew a
policy is going to be different for each company. In
fact, many homeowners only find out that they have a
problem when they decide to
buy a new home. Therefore, it has become very common
for real estate agents to insist that buyer's line up
their insurance the instant they make an offer.
What to do if their are mistakes on your report?
It is important to know what information is listed on
your report, especially if you intend on selling or
buying a house. Reading your report at least once/year
will allow you to be certain that all of the information
is reported accurately and up-to-date.
If you spot a mistake, you have the right to dispute it.
By law, the database company has no more than 30 days to
investigate. If the insurance company can not confirm
their information, the claim must removed. However, if
the carrier stand by the data, it will remain on the
report.
You can attach a note with an explanation of your side.
However, it is unclear whether this will help or not.
You do have the option of suing the insurance company
that made the report. For example, if erroneous
information ends up costing you money - the
refinance loan you could not get approved for or the
house you couldn't sell - you should file a claim.
Also, many states have laws regarding what types of
incident or claims can be counted negatively against a
policy holder when it comes to hiking rates or
terminating a policy. A good idea would be to get in
touch with your state insurance office, to determine
what the rules in your state are.
So how do you keep your claims report clean?
Bottom line, don't file claims.
It may seem dumb to pay for insurance and never utilize
it. However, by law, homeowner's are required to insure
their property. You can reduce the cost by increasing
your deductible. Get more info on
choosing the right homeowners insurance.
If you get one or two marks with your insurance carrier,
do you want a few leaky sinks covered or the disaster
that destroys your entire?
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