Prohibits discrimination in the issuance of certain insurance policies based upon inquiries in which loss or damage is revealed

Would prohibit insurers from refusing to issue or renew a policy, charging a higher premium or assigning to a more expensive affiliate or rating tier any insured or applicant on the basis of any inquiry about a homeowners', personal lines fire, or non-business motor vehicle policy to the insurer or previous insurers, or on the basis of insurer reports of such inquiries to any insurance support organization or company that maintains a claims history data base.

Justification

Policyholders who check with their insurance company to ask questions about their policy or whether a loss is covered may mistakenly believe that there will be no adverse consequences if they do not submit a claim. However, some insurers record inquiries as unpaid losses or claims, and may non-renew their own customers, refuse to insure new applicants or charge a higher premium based on these inquiries, whether or not a loss occurred or is revealed that would be covered under the policy, whether or not a problem has been resolved, and even if a claim is never filed or paid.

Insurers report these inquiries to insurance claim history databases such as the Comprehensive Loss Underwriting Exchange (CLUE), operated by ChoicePoint, Inc., or the Automobile-Property Loss Underwriting System (A-PLUS), operated by the Insurance Services Organization. Inquiries remain on a consumer's "CLUE report" along with any actual claims for five years. Most insurers check CLUE reports to underwrite and rate new applicants for coverage. For homeowners' insurance, CLUE reports track both the consumer and the property, so a consumer can be penalized by inquiries on a CLUE report for a previous residence which the consumer did not own, or for a new property the consumer is buying.

Most consumers are unaware of these databases unless they complain or inquire about an adverse underwriting or rating decision. A consumer can purchase his or her CLUE report and attempt to get it corrected, but only the reporting insurer has the power to change a CLUE report, which it often refuses to do.

The consumer's only recourse is to submit a notation for inclusion in the report.

Consumers should not be penalized for an innocent inquiry or disclosure of a loss that insurers incur no expense to investigate or pay to address. Consumers often choose to fix and pay for damage themselves rather than submit a claim, and are forced to do so if after an inquiry, it is discovered the loss wouldn't be covered by the insurer anyway, often because the value of fixing the damage falls within the insured's deductible. Realtor and consumer groups have criticized insurer use of CLUE reports for the unfairness and deceitfulness of reporting consumer inquiries to a national loss database without the consumer's knowledge and over which the consumer has little control, drawing negative risk conclusions from simple inquiries or problems that may no longer exist and for which the insurer incurs no expense to investigate or address, and the disruption in property sales when companies refuse to issue policies based on CLUE reports. States such as Texas and California have moved to restrict insurer use of CLUE reports after record high consumer complaints about aggressive non-renewals and difficulty finding affordable homeowners' coverage.

Prior legislative history

A.11362 in 2003-04, A.3343 in 2007-2008

Fiscal implications

None.

Effective date

Thirty days after it shall have become law.