Your Home's Rap Sheet Can Mean Costly Insurance
by Kathy Kristof
Pamela
Dieterichs' house has a record, and it's jeopardizing her homeowners
coverage.
Dieterichs knows about
her home's rap sheet for a simple reason: Her insurer spelled
it out for her in a warning letter. She filed three claims in
seven years. If she files another claim, she can kiss the coverage
on her Newbury Park, Calif., residence goodbye.
"I haven't been
canceled yet," she said. "They're just threatening
to cancel."
Unbeknownst to many
homeowners, about one-third of the houses in America are similarly
tagged. In the last decade there has been a growing effort by
insurers to keep track of claims filed on houses. About 600 insurers,
representing about 90 percent of the homeowner market, feed into
a national database called the Comprehensive Loss Underwriting
Exchange, or CLUE. There are other insurance loss databases,
but none are as large or as widely used.
The CLUE database,
maintained by the Georgia firm ChoicePoint Inc., contains about
40 million claims records on homes in every state. The records
show insurance claims for the last five years for damage caused
by, among other things, water, wind or fire. Thirty percent to
40 percent of the homes in America have a loss history, according
to ChoicePoint spokesman Chuck Jones.
As insurance losses
have ballooned in the last few years, this data is being used
to label certain homes as recidivist money losers, virtually
uninsurable in the regular market. Although coverage can be found
through high-risk insurers, a CLUE rap sheet can cause the search
to become more time-consuming and the insurance more costly.
A bad report can delay
escrow when it's time to sell a house, and that has real estate
agents in tight insurance markets up in arms about CLUE.
"We don't have
a lot of scientific numbers, but we keep hearing anecdotes,"
said Stan Wieg, legislative advocate for the California Association
of Realtors. "I have asked members to send in personal experiences.
So far, I'm not seeing a lot of situations where escrows actually
failed because of a failure to get coverage. But we are seeing
situations where buyers had to look a lot more diligently and
pay a lot more" for insurance.
Insurers counter that
loss data are important information for home buyers. If a home
generated several water-damage claims, potential buyers might
want to inspect the pipes and repaired damage. A series of theft
claims might signal neighborhood crime problems that a buyer
might otherwise learn about the hard way.
"On average, our
policyholders file one claim every 12 years," said Bill
Sirola, a spokesman for State Farm Insurance Cos. "If you
are seeing a claim a year or two claims a year, we would have
to think that there's something seriously wrong with that house."
California insurance
regulators have determined that keeping loss records isn't necessarily
a problem. However, there may be an issue with which records
are kept. In most states, insurers keep only records on claims.
But in California, making an inquiry to your agent - asking whether
it would make sense to file a claim for a few lost shingles,
for example - generates a report.
That, however, may
not actually hurt the home's insurability, experts said.
In some cases, insurers
will consider a series of losses to be a reflection on the homeowner,
and thus unimportant when considering covering a house that's
being sold to a new owner. In other cases, claims are considered
to be a reflection of serious maintenance problems, which could
generate more claims. In those cases, availability of coverage
could decline.
In fact, there's one
type of claim - water damage - that almost all insurers consider
a warning. That's mainly because mold claims have become the
insurance industry's fastest-growing money-loser.
"Water claims
are driving a lot of interest in CLUE," said Joseph Annotti,
vice president of public affairs at the National Association
of Independent Insurers in Chicago. "That's directly related
to mold and the fear of mold because the cost for settling those
claims has quadrupled in the past three or four years."
That's a bit of information
that Sharon Meyer of Agoura Hills, CA, wishes she had known earlier.
Meyer said her insurance agent recently called with a warning:
Her homeowners policy, which usually comes up for renewal in
May, would be canceled instead. And she has been warned that
finding new coverage won't be easy. She has had three or four
relatively small water-related claims in the last decade.
"I thought that
was why you had insurance. I didn't realize that if you had too
many claims, they'd just cancel you," Meyer said. "It's
not like they're telling me that my premium's going to rise $100.
They're completely cutting me off. Where are you supposed to
go from here?"
Wondering whether your
house has a record? Here's how to find out:
You can get a copy
of your home's insurance claims report, known as a CLUE report,
from ChoicePoint. It's $12.95 for an electronic copy, $9 for
a mailed copy. Contact the company on-line at www.choicetrust.com,
or call 866-527-2600.
You can't get a CLUE
report for someone else's home. However, if you're buying a house,
the sale can be made contingent on the seller providing the report.
If there is an error
on your CLUE report, notify ChoicePoint. An item in dispute will
be sent back to the reporting insurer for verification. If the
item is not removed, you have the right to append a statement
to the report.
Editor's Note: Kathy
Kristof is a Los Angeles Times staff writer and author of "Investing
101."
© 2003 Tribune
Media Services, Inc.
