CLUE Database & the History of Your Home
Most homeowners know that they should avoid making claims on their policy because it could result in higher rates and perhaps revoked coverage. What many homeowners don't know is that making a claim could also hurt your ability to sell your home in the future. To make matters worse, your home might even have a diminished value because of a claim made by a previous owner. More and more, home insurance companies are relying on a database called the Comprehensive Loss Underwriting Exchange (CLUE) when they deny or drop coverage based on the claims in a home's history. For instance, insurers cringe at the prospect of having to pay for water or mold damage, so they might deny you coverage if there is just one report of water-related issues in your property's history. In this post, we'll tell you more about the CLUE database and what it means for you.
Homeowners Held Hostage
To give you an example of how pernicious the CLUE database can be for homeowners, consider the case of a Washington couple who reported some minor water damage to their insurer. Even though the couple decided against filing a claim, their insurer not only dropped their coverage but also reported the damage in the CLUE database. So, when the homeowners went to apply for other coverage, they were denied at every turn. Technically, insurers are only allowed to share claims-related information with the CLUE database, but that obviously did not stop the insurance company in this case.
More Aggressive Tactics
Formerly, the CLUE database was only used by insurers to identify potential cases of fraud for consumers who had a record of filing numerous home insurance claims. Recently, though, because insurers have lost billions of dollars on home insurance in the last few years, they are increasingly using the database to screen for other risks. Some of the country's biggest home insurance companies have dropped thousands of their policyholders and/or refused to issue policies in over twelve states. For example, Allstate will no longer issue coverage on homes in California, Gulf Coast states, or Eastern Seaboard states. In some areas, home sales have dropped considerably due to CLUE-related problems in obtaining insurance coverage. This is especially unfair because a home might be blackballed because of one claim or even a single report of damage that never lead to a claim. Considering the unprofitable nature of the home insurance industry in recent years, this hypersensitivity to claims risk is expected. Some experts predict this trend will reverse once home insurance companies experience more profitable years.