C.L.U.E. Reports
More home buyers, concerned about possible previous insurance losses experienced at a property they are considering, are requiring home sellers to provide a C.L.U.E.® report as a contingency to a purchase offer. A C.L.U.E.® Home Seller's Disclosure Report is an independent source of information about insurance losses at your home address within the past five years. If your home has not experienced a loss within the past 5 years, the report can provide comfort to a potential buyer. When no losses are associated with a property the report would state that no losses were found for the address shown.
Unlike other loss history reports, the C.L.U.E.® Home Seller's Disclosure Report does not display information that a home seller may wish to keep private, such as Name, Social Security Number and Date of Birth.
It is available immediately via online delivery for your primary address or by mail for other properties you own.
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Home sellers should provide potential buyers with a C.L.U.E.® Home Seller's Disclosure Report!
Providing this information makes the home you are selling more attractive. More and more homebuyers are requiring home sellers to provide a C.L.U.E.® Home Seller's Disclosure Report as a contingency to a purchase offer.
By ordering the C.L.U.E.® Home Seller's Disclosure Report at the time of listing, the smart seller and her agent are ready for the first potential buyer to walk in the door. At the same time, a potential buyer will achieve a greater comfort level when making an offer on a property for which the loss history is known.
Buyers and real estate agents can't obtain C.L.U.E.® Home Seller's Disclosure Reports directly, so the property owner needs to obtain the report by directing them to www.choicetrust.com.
There, the home seller can obtain a Home Seller's Disclosure Report, providing a five year insurance loss history for a given address, without divulging personal and private information about the home seller. If the report for the property indicates that insurance losses have not occurred within the past five years, the buyer can feel comfortable that insurance loss history of the property should not impact the availability or pricing of Homeowners insurance.
This may give your home an advantage over one where the insurance loss history is not known.
Excerpts from Privacy Rights Clearinghouse (Fact Sheet 26: CLUE Insurance Databases)
About CLUE 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:
> Insurance companies feed information about property loss claims, perhaps even inquiries about coverage, into a central database.
> If you file a claim for loss against your homeowner policy, the insurance company adds this information to the national database.
> The CLUE database is maintained by an information vendor, not another insurance company.
If you apply for homeowner's insurance with another company - say, you move to another part of the country - the new insurance company can access the CLUE database and learn of your past claims.
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:
> Date of the loss.
> Type of loss claimed.
> Amount paid by the insurance company.
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:
> Inaccurate information can be included in the report.
> The report may contain information about someone else or another property.
> A report may use information other than claims data to rate you as a risk - even if the company doesn't pay a claim.
> Your phone calls to inquire about a possible claim may be reported.
> The loss may fall below your deductible and the claim is denied or you are advised not to submit a claim. Still, you can end up with a negative mark.
> Even when repairs are made and the property is restored to the original condition, the CLUE report can include information about the claim.
> The report can affect the premium you pay as well as whether you are insured at all.
> Your history as a long-time customer with your prior company is not a factor of the CLUE report.
For some real-life horror stories told by homeowners who have experienced such problems, see the next section Part 3.
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