NAIC Holds Action On Property Loss Databases

By Steve Tuckey

NU Online News Service, March 16, 12:16 p.m. EST, SaltLake City, Utah?The National Association of InsuranceCommissioners meeting here has decided to hold off developingregulations governing insurers' controversial use of propertyclaims loss history databases.[@@]

Regulators said they would delay drafting anything to bettercoordinate NAIC efforts with state lawmakers exploring the sameissue.

In recent years, insurers' use of databases providing propertyloss history records on homes has been increasing. Firms providingthe information include the Comprehensive Loss UnderwritingExchange (CLUE), operated by ChoicePoint, and A Plus run by theInsurance Services Office.

Critics complain that simple policyholder inquiries that arelogged can result in adverse underwriting decisions, and thatpolicyholders are afraid to make claims for fear of damaging theirrecords.

Oregon Administrator Joel Ario told the Market Regulation DCommittee that consumer complaints on the issue have soared inrecent years. As a result, his department is developing ahomeowners bill of rights for his State Legislature.

The Oregon measure, Mr. Ario said yesterday, "will be ourmarquee piece of legislation this year."

For the past year, the National Conference of InsuranceLegislators (NCOIL) has been developing a model law to regulate useof property loss history and could finalize one at its summermeeting in July.

By the time of the next NAIC meeting in June, committee memberssaid they hope to have a better sense of the issues that would beincorporated in any model regulation. They would then have theoption of working with NCOIL on a joint basis, or going their ownway if they were not happy with the state lawmakers' workproduct.

Property-casualty insurance representatives urged the regulatorsto go slow in the development of a new regulation.

American Insurance Association Vice President Dave Snyder saidno action should be taken until a cost-benefit analysis isundertaken.

"I think it would be wise if you would take a closer look atthese complaints and see if any new regulation would be the answerto them," he said.

Don Cleasby, of the Property-Casualty Insurers Association ofAmerica (PCI), said that with so many states looking at the issue,some uniformity would be welcome. But he urged regulators to workwith NCOIL first.

Funded consumer representative Birny Birnbaum, executivedirector for the Austin, Texas-based Center for Economic Justice,said it would be a mistake to let NCOIL take the lead on the issue,as it did with the development of a model credit scoring lawgoverning insurers' use of applicants credit records to rate themas insurance risks.

He derided the NCOIL proposed model as one developed to placatean industry in which consumer interests were not taken intoaccount.

The final issue holding up approval of the NCOIL model is how totreat those claims that did not result in any payment. Insurersclaim they are valid to use in the underwriting process, whileothers claim they should not be recorded.