Claims That Boost Your Insurance Rates - water damage

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Claims That Boost Your Insurance Rates

by Mark Terry

Monday, March 31, 2008

provided by Bankrate.com

http://finance./insurance/article/104738/Claims-That-Boost-

Your-Insurance-Rates

When should you make an insurance claim?

For many, the answer is a no-brainer: " Whenever I have an accident

or suffer damage to my house or car. "

Unfortunately, the decision about whether to file a claim is rarely

so simple. In some cases, making a claim may cause an insurance

company to raise your rates.

In other instances, the decision to file a claim could put your name

into a database that makes it difficult to get or maintain coverage

in the future.

Insurance is there to give you peace of mind and to restore a

damaged car or property to its original state.

More from Bankrate.com:

• 6 Steps to Better, Cheaper Car Insurance

• Insuring Home Improvement Success

• Health Insurance Hard to Find for the Over-50 Crowd

" The whole point of insurance is to make good on a loss, to make

individuals whole again, " says Wilkinson, vice president of

global issues for the New York-based Insurance Information

Institute, an organization focused on improving public understanding

of insurance.

However, before you make another claim, make sure you know how it

could come back to haunt you.

Database Danger

Many people fear that filing insurance claims will cause them to

be " blackballed " by insurance companies, resulting in higher

premiums, loss of coverage and difficulties obtaining new insurance.

Unfortunately, in some cases they might be right.

The vast majority of consumer insurance claims are recorded in one

or both of two databases: CLUE and A-PLUS.

The larger and better-known database -- CLUE, which stands for Claim

Loss Underwriting Exchange -- is operated by Georgia-based

ChoicePoint.

A-PLUS, which stands for Automated Property Loss Underwriting

System, is the other database. It is run by New Jersey-based

Insurance Services Offices Inc.

ChoicePoint's CLUE is so popular that people in the insurance

industry often refer to reports generated by either database

as " CLUE reports. "

" More than 98 percent of insurers writing automobile and homeowners

coverage provide loss data to the CLUE databases, " says Fiona

McCaul, corporate communications manager of ChoicePoint.

CLUE reports include " policy information such as name, address and

policy number, and claim information such as date of loss, type of

loss and amounts paid, " McCaul says.

Homeowner claims and auto claims are registered in CLUE and A-PLUS.

Health insurance and other types of insurance are not registered.

Get your CLUE report

What's in your reports?

• To get a free copy of your CLUE report, contact ChoicePoint (888)

497-0011.

• To get a free copy of your A-Plus report, contact Insurance

Services Offices Inc. (800) 627-3487.

McCaul emphasizes that ChoicePoint does not determine how the

information in its database is used. That is up to individual

insurance companies.

However, insurance companies may use these databases -- which

originally were created to prevent insurance fraud -- to research

and screen applicants' claim histories. In some cases, this could

result in higher rates or difficulty obtaining coverage.

Information found in these databases may be more expansive than many

people realize. For example, the Insurance Information Institute

warns on its Web site that an insurance carrier may submit

information to CLUE when a customer simply calls on an inquiry.

However, McCaul says ChoicePoint frowns upon that practice.

" A claim is loaded into the database when the loss occurs and is

accessible when a CLUE report is requested by the carrier at the

time of application for insurance, " she says. " For several years we

have cautioned insurance carriers not to enter inquiries into the

CLUE database -- only actual claims. "

Some states have taken steps to restrict the type of information

that may be found in these databases. In particular, many states

have passed laws that regulate whether or not inquiries are counted

as claims.

About one-third of states have passed legislation regulating how

these databases can be used, according to the Insurance Information

Institute Web site.

" All 50 states require insurance companies to file their rating

criteria and premium structure with regulators, " McCaul says.

This means any decision made by a carrier must comply with the

information filed with -- and in some cases approved by -- state

insurance regulators, she says.

Data is kept in CLUE and A-PLUS for five years, although some states

can pass legislation that requires information to be kept for

longer, so long as these laws comply with restrictions established

by the Fair and Accurate Credit Transactions Act. For example, in

California, car insurance claim data is held for seven years.

Homeowners Insurance: When to Think Twice

So, when should you file a claim?

" There are no general guidelines, " says Tim Bowen, director of

homeowner property claims for MetLife. " These decisions are made on

an individual basis on claims made by any insurance carrier's

customers. "

Filing a single claim for homeowners insurance generally will not

result in higher rates. However, Bowen says that making two claims

in a three-year period is more likely to trigger a hike, although

each company is different. Many companies base their decisions on

how long you've been with the company and the nature of the claims.

Also, most insurers say homeowner claims related to the weather or

other catastrophes typically do not result in higher rates.

So, which claims do pose a potential risk to your insurance rates or

coverage?

Dog bites. Sorry, Rover -- dog bites are the largest single cause of

home policy claims, according to P. Hartwig, president and

chief economist of the Insurance Information Institute.

Many insurance companies keep a list of dog breeds most likely to

attack, based on Centers for Disease Control and Prevention

statistics. If the homeowner owns that breed, it may be difficult to

obtain insurance.

A single attack is often likely to result in higher premiums.

However, homeowners may be able to keep their rates from escalating

by remedying the situation to the insurance company's satisfaction.

This may involve getting rid of the dog, or taking the dog to

a " psychologist " or animal trainer. Sometimes, the homeowner's rates

will then depend upon passing a probationary period, such as six

months without an attack.

Water damage. Water damage tends to set off a barrage of red lights

for insurers, largely because of the costs of eliminating mold. The

biggest controversy over CLUE reports has been over water damage and

its effect on real estate sales.

Homebuyers cannot obtain CLUE reports on homes they are considering

purchasing. However, the homebuyer's insurance company can obtain

the report in deciding whether to insure the home.

If the insurance company finds a history of mold or water damage,

the new buyer may have problems getting home insurance, according to

Liz Pulliam Weston, author of " Easy Money " and columnist for MSN

Money.

" Be careful with a water claim, " she says. " Insurance companies

aren't as paranoid as they used to be a few years ago, but many have

begun to exclude mold coverage from their policies. "

Plumbing problems that cause damage inside a property also can be

red flags to insurance companies, particularly if the repairs -- or

lack thereof -- result in another, similar claim.

You might be better solving the water damage issues yourself,

especially if the damage is minor and involves broken pipes or leaks

in window wells, walls and seams.

Some home sellers may actually use CLUE reports to their advantage,

McCaul says.

" Home sellers can use their CLUE report as a marketing tool to

demonstrate to potential buyers that their home has not had a loss

claim or, if it has, to show that repairs were done properly, " she

says. " Homebuyers can make the purchase contingent upon the seller

providing a copy of the CLUE report. "

Slip-and-fall claims. A slip-and-fall injury is a generic term used

to describe an injury that happens when someone trips, slips or

falls as a result of a hazardous or dangerous condition on someone's

property.

Slip-and-fall injuries, according to the National Safety Council,

are the single largest cause of emergency room visits. If someone

hurts themselves on your property and files a claim with their

insurance company, your rates may rise.

Auto Triggers

Unfortunately, it is much harder to pinpoint which types of claims

may cause your auto insurance rates to spike.

For the consumer, automobile insurance is more volatile and very

dependent on driving record, age and types and number of claims,

Weston says.

Other rate-hike or policy cancellation triggers vary from state to

state and company to company. However, factors that may be

considered include whether you were driving while drunk, whether

injuries incurred, and the severity and type of accident.

Some companies have a policy to forgive a first accident, but such

rules are not ironclad.

To keep your premiums from increasing, it's usually a good idea to

avoid filing an auto claim if you have accidents or damage totaling

$1,000 or less. If you decide to take this approach, make sure to

raise your deductible to $1,000, which can lower your premiums.

Paying out of pocket for damage covered by insurance is distasteful

to many people. However, a series of small claims can result in

increased premiums and possible loss of coverage.

It gets back to the notion of what insurance is all about: bailing

you out from a large disaster, rather than the small things that

annoy rather than harm.

" There are folks who are so strapped for cash and living paycheck to

paycheck that even a minor fender-bender would be a catastrophe, and

in that case they might want to keep a low deductible, " Weston

says. " But for most of us, you'd rather have money in the bank and

cover the thousand-bucks deductible yourself. "

In addition, if you back your car into a telephone pole or another

car and nobody is hurt, it might be better to just pay for the

damage yourself.

" My feeling is that if you have a little accident that's under the

deductible, yes, your insurance company wants you to report it, "

Weston says. " But you should at least consider just handling it out-

of-pocket if no one was injured and no police report was filed. "

However, a word of caution: If you caused an accident involving

other vehicles, you should report it to your insurance company, even

if the damage to your own vehicle was negligible. The other party

may, legitimately or not, file a claim for damages or injury. Having

your version of the accident on record will go a long way toward

having your insurance company on your side.

Also, many states require accident reports to be filed by the

police. If they are, your insurer will be sure to find out whether

you report it to them or not.