Claims that boost your insurance rates

By Mark Terry • Bankrate.com

http://www.bankrate.com/nltrack/news...1.asp?caret=1d

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.

"The whole point of insurance is to make good on a loss, to make
individuals whole again," says Claire 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 the 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.

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.

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.

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 Robert 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.