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UPDATED: Oct 14, 2019
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Car insurance companies compete against one another for market share. Most companies want to acquire the most market share, but there are a few that care less about market share and more about premiums.
Unlike some other competitors who focus on keeping information on their clients secret, competitors in the insurance marketplace share information.
Car insurance carriers don’t just share information to be nice. By entering relevant rating information into an exchange database, every company benefits.
In fact, many state departments that oversee the insurance division require any carrier licensed to sell products to report a minimum amount of information to a database used nationwide.
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Why does sharing information benefit all insurance companies?
Insurance companies aren’t going to voluntarily give their competitor information on how to contact their customers. This practice wouldn’t make much sense.
However, it does make sense for all of the providers to share information after the customer has already started to solicit quotes.
It’s beneficial for all insurers to voluntarily participate in an information exchange because it helps the company that’s reviewing the application charge the right rates.
The underwriter who has the file on their desk will be able to see if the applicant has been honest or if rating factors need to be changed. Since all companies have access to the same system, it evens the playing field.
What type of rating factors can be affected by information on reports?
There are more than just a couple rating factors that companies use when they are coming up with your final rate. Some of the factors are well known but there are also other factors that consumers have no clue have an effect on rates.
If someone is dishonest in their application because they want to try and save money, they could be taken by surprise when their quote goes up by 20 or 40 percent.
Not everything is verifiable but companies can find out a lot more than an applicant may know.
Some factors that can be affected by details on verification reports include:
- At-fault accidents that are still chargeable but weren’t listed on the application
- Multiple non-fault accidents that can change risk class from preferred to standard
- Drivers who’ve had claims in the insured vehicle but aren’t listed on the new application
- Cancellation dates that show that the policyholder had a lapse in coverage
- Inception and cancellation date that represents how long the insured has been with the carrier
What type of system do auto insurance carriers report to?
Auto insurance carriers report to a database that’s called C.L.U.E. The acronym stands for Claims Loss Underwriting Exchange.
The database can be accessed by all carriers with accounts and by drivers who order their own personal records.
Generally speaking, a C.L.U.E. record is updated when claims are filed, settled, and closed.
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Does ordering a C.L.U.E. report cost the insurer money?
It would be nice for the insurer that is conducting business if ordering a C.L.U.E. report was free.
Unfortunately for companies, the agency in charge of reporting this consumer information, which goes by the name LexisNexis, is a for-profit company that makes more maintaining and reporting information.
This is why all companies have to pay for records.
How do auto insurance companies order C.L.U.E. records?
Ordering the actual record isn’t difficult at all. Some companies will give their agents the authority to order C.L.U.E. reports as they are finalizing an application.
Other carriers only hand over authority to run these reports to the underwriters who assess the applications.
Carriers will have an internal system to order records. Many times, the system is built into the quoting tool to ensure that everything is pre-populated into the report request easily.
The form may ask for the policyholder name, address, vehicle identification number, and/or a driver’s license number. If you’re ordering your own report, you can order it online or by mail.
What happens if information on the report is incorrect?
Mistakes are made from time to time. If the person in charge of inputting information accidentally labels an accident as at-fault instead of not at fault, the policyholder could face some hassles when they switch companies.
Since carriers have to go by what’s on the record, they will have to request paperwork to change what’s already in the file.
In most cases, the insurance company verifying the application will ask one or both of the policyholders on file to get paperwork from the old carrier saying that the record is an error.
If you’re trying to get the file updated, ask the company that reported the information for a Letter of Experience. Keep copies of this letter so you always have proof.
What other information will the carrier verify?
Verifiable information goes past the information that the old carrier can provide. Companies also need to check each driver’s motor vehicle record to see if there are unlisted infractions.
If you have a minor infraction within the last 36 months or a major violation within the past 5 to 7 years, all of that needs to be disclosed.
In states where credit is used to make decisions on insurance premiums, the carriers will order credit-based insurance scores. Just like the C.L.U.E reports, the requests need to be made through LexisNexis.
The score can affect the policyholder’s rate.
Be honest when you’re filling out your application. It’s even important to enter all of your information accurately in the quote form.
If you want to get instant quotes right now, use an online brokerage style tool for free and you can compare the rates through all of the biggest competitors.
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