Think Denied Insurance Claims Can't Hurt Your Rates? Get A CLUE

NEW YORK (MainStreet) - Denied insurance claims can not only rough up your rates, but keep them in sad shape for a long time.

A report from InsuranceQuotes.com finds that most people are surprised to learn that even denied claims (or claims that were discussed with an agent but never filed) can lead to higher car and homeowner's insurance rates. Not only that, but claims made by a previous owner can raise homeowner's insurance costs significantly.

The survey, conducted by Princeton Survey Research Associates International through telephone interviews of 1,000 adults throughout the continental United States, found that only 8% of respondents were aware that claims are stored for seven years in the Comprehensive Loss Underwriting Exchange database — that's CLUE — that all insurance carriers can access. Only 1% of all Americans are very familiar with CLUE reports, and an additional 7% are somewhat familiar.

In fact, only 17% of Americans are aware that insurance companies can penalize homeowners for prior owners' claims, according to the survey. It also turns out that any claim, even denied claims, can cause car and homeowner's insurance rates to rise. This is even true of potential claims that were never filed but were discussed with an insurance agent. On average, car insurance premiums increase 38% after a claim and homeowner's insurance premiums increase 9% (though premiums in Wyoming, for example, can jump 38% after just one claim). Not surprisingly, 84% of Americans find that practice unfair.

"Most consumers are shocked to hear that denied claims, never-filed claims and claims made by a previous homeowner can raise their insurance costs," says Laura Adams, insuranceQuotes.com's senior analyst. "Prospective homebuyers should ask the seller for a copy of the property's CLUE report before making an offer."

Unfortunately, only 10% of homeowners have had a look at that report. Then again, those same survey respondent are probably too busy protecting themselves from dangers that don't exist to address actual threats to their premiums. A full 30% percent believe their insurer can raise their home insurance rate if they miss a single mortgage payment. That's false, though your rate can climb if you make a habit of skipping payments and your credit score dives. Meanwhile, 33% of Americans labor under the assumption that a claim on their auto insurance can result in a higher home insurance rate. Nope: That's not even remotely true.

Those beliefs, and attitudes toward insurance providers in general, varies widely by generation. Among millennials (ages 18 to 29) only 75% thought raising rates after a consumer simply speaks to an insurer about specific damage caused to a vehicle or home was unfair. By comparison, 85% of 30- to 49-year-olds and 89% of people over 65 — basically anyone with a lot more experience filing such claims — disagreed.

Meanwhile, even those wizened insurance veterans don't have all the facts. About two-thirds of people over 65 were most unsure about whether insurers can raise your rate if you make a home insurance claim. (They can.) By comparison, just 47% of millennials and 44% of 30- to 49-year-olds were similarly confused.

Fair or not, CLUE is a fact of life, but that doesn't mean you can't fight back. The Fair Credit Reporting Act entitles you to a free annual copy of their CLUE report, which you can request from parent company LexisNexis Risk Solutions. If a homeowner or car owner gets their report and sees an error, LexisNexis has up to 30 days to investigate after the error is reported and will issue a notification five days after their review is complete. If a home has a history of claims related to poor plumbing or electrical systems, a homebuyer can wipe out any negative CLUE report information by notifying their insurer of repairs and upgrades.

About 82% of people surveyed had never heard of the CLUE database. Considering that 53% of respondents were homeowners, maybe it's about time they looked into it.

— By Jason Notte for MainStreet 

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