Claims that boost your insurance rates

By Bankrate.com

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 result in an insurance company raising 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, the vice president of global issues for the Insurance Information Institute, an organization focused on improving public understanding of insurance.

However, before you make a 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 (.pdf form), which stands for the Claim Loss Underwriting Exchange -- is operated by ChoicePoint in Georgia. A-PLUS, or the Automated Property Loss Underwriting System, is run by Insurance Services Offices in New Jersey.

CLUE is so well-known that people in the insurance industry often refer to reports generated by either database as "CLUE reports."

"More than 98% of insurers writing automobile and homeowners coverage provide loss data to the CLUE databases," says Fiona McCaul, the 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," she says.

• Insurers keep a secret history of your home

Homeowner and auto claims are registered in CLUE and A-PLUS. Health insurance and other types of insurance are not.

McCaul emphasizes that ChoicePoint does not determine how the information in its database is used. That is up to individual insurance companies.

However, insurers 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. About one-third of states have passed legislation regulating how these databases can be used, according to the Insurance Information Institute's 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 states can pass legislation that requires information to be kept for longer, so long as these laws comply with restrictions established by the federal Fair and Accurate Credit Transactions Act. For example, in California, data on care insurance claims are held for seven years.

When to think twice

So, when should you file a claim?

"There are no general guidelines," says Tim Bowen, the director of homeowner 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, making two claims in a three-year period is more likely to trigger an increase, although each company is different. Many companies base their decisions on how long someone has been a customer and the nature of the claims.

Also, most insurers say homeowner claims related to the weather or other catastrophes do not typically 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, the 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 (.pdf form). If a homeowner owns one of those breeds, it may be difficult to obtain insurance.

Continued: Water damage

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