What Is a CLUE Report ?

Homeowners insurance is a necessary requirement for real estate transfers and for good personal financial management for homeowners. In exchange for a yearly premium, the insurance company promises to pay financial losses concerning the property that would otherwise have to be paid by the homeowner. Mortgage companies require coverage to protect their interest in the house, too.

There are usually two parts of a homeowners policy: one covering casualty losses to the structure, e.g., wind, fire, and water damage. There is often liability coverage also, which protects against damages unrelated to the property itself, e.g., delivery person slipping on icy steps.

Recently, insurance companies have been faced with an exponential increase in the number and cost of casualty claims, especially related to water damage and mold. Furthermore, in some areas, damage claims caused by hurricanes have added to the already increasing claims. Insurance companies always are subject to the costs of “policy-hoppers,” people who make real or imagined claims, collect the money, and then switch insurance companies to keep their premium from increasing on renewal.

To get as much information on the risk, insurers often use a central data-base of policies, insureds, and claims developed by ChoicePoint Inc., a data management company that collects insurance data and produces a CLUE® (Comprehensive Loss Underwriting Exchange) property loss history report.

The CLUE report contains information regarding the property and the homeowner, which is submitted by the insurer. It goes back five years. The underlying database tracks 27 “causes of loss” about a claim submitted to an insurance company, including: environmental contamination; damage to property of others; dog bite; earthquake; fire; flood; freezing water; hail; lightning; medical payments made under a policy; slip and fall; smoke damage; theft/burglary claims; vandalism; water damage; wind damage; and workers compensation claims.

Included not only are claims actually made; but also all inquiries regarding claims, even if the claim was never submitted. Thus, an insurance company can look at the risk history of a property and of an insured when making its decisions concerning the cost of a policy on its issue or reissue, or whether to issue it at all. Each insurer decides how to use CLUE reports based on its own underwriting and rating criteria. In some companies, a home with two water damage claims in the last five years or several thefts will qualify for a standard policy, in others for a high-risk pricing tier. Some insurers will refuse to insure it altogether. In many states, insurance companies can revoke a policy within 60 days from the issuance of a policy based on underwriting issues as uncovered in a CLUE report.

Because the CLUE report is designed to help insurance companies, it contains personal information on the insured, including date of birth and social security number, and the claims history of the insured for casualties unrelated to the condition of his or her house. A CLUE report is protected under the Fair Credit Reporting Act (FCRA), and can be accessed only by the insurance company, or the insured, who can give it to anyone he or she pleases (A sample CLUE report can be viewed at http://www.choicetrust.com.).