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home / insurance / in the media

Charlotte Observer (North Carolina)
Jun 06, 2004

by MARK JOHNSON, RALEIGH BUREAU

INSURANCE BILL DRAWS COMPLAINTS;

CRITICS SAY LEGISLATION'S LANGUAGE IS TOO BROAD TO PROTECT CONSUMERS
RALEIGH, N.C. -- North Carolina lawmakers introduced legislation Wednesday intended to protect consumers who only ask their insurance company a question but get tagged as filing a claim. Consumer advocates, however, said the bill is so broad that it doesn't do a bit of good.

"That language goes too far and does not provide the protection you seek," said Stephanie Simpson, a lobbyist for the N.C. Association of Realtors, after the bill was introduced in the House Insurance Committee. The bill "negates exactly what you're trying to do."

The questions that show up as claims on an insurance database can derail, or at least hinder, the sale of a home when a buyer's insurance company wants to charge more or may not write a policy because of the "claim." The database reports also could affect a customer's ability to change insurance companies.

The committee approved the legislation on a voice vote without any discernable objections. It now goes to the House floor, where it could be amended before being voted on.

Rep. Hugh Holliman, D-Davidson and a co-chair of the committee, said the bill prevents "general inquiries" to an insurance company from being submitted to an industry-wide database, called CLUE (Comprehensive Loss Underwriting Exchange). It's a computer database that holds 90 percent of the insurance claims filed in the United States.

Customers in North Carolina and other states have called their insurance company when, for example, their toilet overflowed or a baseball crashed through their window, and asked a question about their coverage. Their question was recorded as filing a claim, even if they didn't ask to file one, even if no work was done and no money was paid.

The N.C. Department of Insurance described the practice as "widespread."

The company that maintains the CLUE database, Georgia-based Choicepoint, dispatched a letter last year to insurance companies warning that: "Claims information should not be reported when a customer merely asks questions about their coverage or deductible."

"What we've had in the past is probably an abuse," Holliman said during the meeting.

Holliman spent the past week trying to work out language between the state's major insurance companies and the Realtors association, which has received reports of home sales hampered by inaccurate reports of insurance claims. The Realtors and consumer groups say the insurance companies won out in the version of the bill introduced Wednesday.

Holliman's bill, at first, says insurance companies can't use an inquiry as the basis for a decision about an insurance policy or premium. But the legislation goes on to say a policyholder who reports an "incident" can be recorded as filing a claim.

"That renders that bill meaningless," said Doug Heller, executive director of the Foundation for Taxpayer & Consumer Rights, based in California, who said similar language was proposed there. "That was the insurance industry's attempt to get out of the bad public relations spot they were in. That (N.C. bill) would do nothing to protect consumers."

An additional sentence in the bill says that the legislation cannot stop insurance companies from acting if they determine there is a "substantial increase in the risk."

"It says: 'It doesn't matter what you pass in this bill,' " Simpson said.

Realtors are concerned about the inaccurate claims reports because some home buyers are finding out, at the last minute, that they can't get homeowners insurance or the insurance will cost more because of an inquiry by the current owner from years before.

Susan Valauri, a lobbyist for Nationwide Insurance who attended the committee meeting, said the company supports the bill, saying it allows it to make "a good business decision."

"Those of us in the large companies in the state didn't perceive this to be a problem," Valauri told the committee. Nationwide is the No. 2 homeowners insurer in the state.

Dascheil Propes, chief deputy commissioner at the Department of Insurance, said the insurance companies and Realtors were at an impasse.

"The Realtors don't want any loss reported in a database arrangement that an owner doesn't file a claim for," Propes said. "The (insurance) industry will tell you that, statistically, once you have a claim you're more likely to have another than if you never had one. They want to know about losses that could lead to future losses."

Propes said the department didn't think the bill would get any better and supports it.
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Mark Johnson: (704) 358-5941 or mjohnson@charlotteobserver.com.


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