It's time you got a clue about how insurance companies evaluate your "risk" as a customer.
It's no secret that any claim you file or accident you cause is factored into your car insurance rates. But what you might not realize is that all your claim information is collected by a private company and sold for other insurers to look at.
Along with your credit-based insurance score, C.L.U.E. (the Comprehensive Loss Underwriting Exchange) pays a major role in your auto insurance quote.
Blemishes on your good name
C.L.U.E. is a loss-history information database maintained by a subsidiary of LexisNexis Risk Solutions.
"It enables insurance companies to access prior claim information in the underwriting and rating process," says Stephen Gillard, product principal for C.L.U.E., LexisNexis Risk Solutions.
Similar to blemishes on your credit report, C.L.U.E. auto reports include your claims that are up to seven years old. The information is reported by insurance companies themselves, and the majority of insurers participate.
"This information helps car insurance companies understand what type of risk may be associated with issuing you a policy," says Gillard. "It predicts the likelihood of future claims."
Gillard says the following information appears in your C.L.U.E. report, for both auto and home insurance claims:
- Your name
- Date of birth
- Policy number(s)
- Claim information such as date of loss, type of loss and amounts paid.
- Inquiries made concerning your coverage (for example, asking if a loss is covered, opening a claim and never completing it or receiving payment for it, etc.)
C.L.U.E. reports and car insurance rates
Joel Ohman, a certified financial planner, says that the Fair Credit Reporting Act (FCRA) entitles you to a copy of your C.L.U.E. report at no charge once a year, just like your credit report.
"You also have the right to dispute inaccurate information you find in your C.L.U.E. report," says Ohman.
If you discover an error on your C.L.U.E. report -- like an invalid claim report or an incorrect claim payment -- report the problem to LexisNexis.
"They will contact your insurance company on your behalf and ask for clarification on the matter," says Ohman. He says the process to dispute an item on your C.L.U.E. report is very similar to disputing something on your credit report.
The insurance company that reported the disputed data has 100 days to provide evidence that the information on the C.L.U.E. report is accurate.
"If the company does not respond within that time, the disputed item is removed from the database and your report," he says.
Disputing information on a C.L.U.E. report and having a negative item removed may reduce your car insurance rates by making you eligible for a "good driver" discount or removing your "high-risk" label.
Add in your insurance score
Even though your C.L.U.E. report carries a lot of weight, it's not the only factor used to judge your level of risk.
In addition to your C.L.U.E. rating, most car insurance companies assign drivers an "insurance score" based on their credit score.
"An insurance score is a credit-based statistical analysis of a consumer's likelihood of filing an insurance claim within a given period of time in the future. This data can help underwriters better assess risk exposure prior to granting insurance coverage," explains Gillard.
"Your credit is used to compile your insurance score because car insurance companies feel a low score indicates a greater chance you'll file a claim," says Jack Smith, a spokesperson for the Independent Insurance Agents and Brokers of New York.
Smith says that the primary factors that determine a credit-based insurance score are things like outstanding debt, length of credit history, late payments, new applications for credit, types of credit used, payment patterns, available credit, public records and past due amounts.
"Most car insurance companies use the C.L.U.E. report along with a credit-based insurance score to asses a customer," says Smith.