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Get a CLUE about homeowners insurance

By Michele Lerner

May 3, 2011

The Comprehensive Loss Underwriting Exchange (CLUE) report, generated by LexisNexis, includes auto and home insurance information gathered in a national database from insurance companies. According to LexisNexis, CLUE reports for home insurance contain a seven-year history of claims against a particular property, along with personal identification information of the homeowners. The insurance portion of the report includes the date of a loss, type of loss claimed and amount paid by the insurance company.

How property insurance companies use CLUE reports

"We use CLUE reports for homeowners insurance to help measure the risk associated with providing insurance as accurately as we can," says Dick Luedke, a spokesman for State Farm Insurance. "We look at the history of the homeowners and the history of the property to estimate risk."

Luedke says that CLUE reports are just one factor in determining homeowners insurance quotes, which are based on a variety of issues such as the location and size of the home, construction materials and local weather.

"At State Farm we are looking for the number of claims and the type of claims on a policy in order to assess risk," says Luedke. "For example, if there are consistent claims over several years for water damage, there could be a higher risk of more water damage. We are also looking to see if repairs have been made that will reduce risk in the future. For instance, if a homeowner called about hail damage, we want to know if they repaired the roof or siding. Otherwise, we might have to pay higher costs to repair the damage from two separate incidents."

Generally, insurers charge higher premiums to customers with numerous or expensive claims. Luedke says CLUE reports can help homeowners insurance providers accurately assess risk and therefore charge fair premiums.

CLUE reports can help home buyers and sellers

The Insurance Information Institute (III) recommends that home buyers request a loss history report in order to learn whether previous owners made insurance claims and, if so, what type of claims were made. For example, a series of water damage claims could indicate a plumbing problem that will require costly repairs. Buyers can opt to negotiate with the sellers about repair issues or reduce their offer if they find problems.

"Buyers cannot request a CLUE report directly from LexisNexis because anyone other than the owner or an insurance company must have a 'permissible purpose' for the request," says Hageli.

Buyers can make their offer contingent on receiving a copy of the CLUE report if desired. III points out that CLUE reports can reveal positive information about a home as well, such as the existence of a new roof or other repairs that add value to the home and may even reduce the cost of homeowners insurance.

A homeowner who is selling a property, should also request a CLUE report. Sellers, as well as their real estate agents, can request a CLUE "Home Seller's Disclosure Report", which provides a five-year insurance loss history on the property without including personal information about the property owners. Offering this report to a potential buyer can ease concerns about the condition of the residence.

Check up on your CLUE report

"Very few consumers know about this, but everyone should request a copy of their CLUE report in order to correct any errors," says Alex Hageli, director, personal lines for PCIAA (Property Casualty Insurers Association of America). "If a CLUE report results in an increase in your premiums, denial of coverage or in the cancellation or reduction of your insurance coverage, your insurance company must inform you of this and tell you how to get a copy of the report."

Homeowners should check their CLUE report for accuracy before requesting a homeowners insurance quote from a new insurance company in case there are errors. Under the Fair Credit Reporting Act, consumers are entitled to a free copy of their CLUE report each year. Hageli says that the process for disputing errors is similar to fixing mistakes on a credit report, with the necessary steps described on the report itself.

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