NCOIL Model Would Set CLUE Restrictions

Under the proposal restrictions would be placed on how insurers could use property loss history of either the applicant or the property that is about to be insured.

The issue has arisen in the past couple of years after complaints about the use of databases such as the Comprehensive Loss Underwriting Exchange and the A-PLUS property database.

Some industry representatives feel the NCOIL proposal is too overreaching in that it regulates underwriting standards rather than any database methodology.

"This is not a model about regulating databases," said Robert Zeman, senior vice president of the Property Casualty Insurers Association of America. "This is a model about restricting underwriting."

Critics have complained that mere inquiries about possible claims often result in the kind of black marks that sometimes make it difficult for property owners to obtain coverage.

To remedy that, the model prohibits any insurers disclosing to either a database provider or reporting agency any inquiry made by a consumer.

But the model goes even further in not allowing any claims or losses which did not result in any payment to be considered unless three such incidents have occurred in the past three years.

PCI representative Lynn Knauf said such a restriction would hinder insurer efforts to detect fraud.

Ms. Knauf said whatever concerns that have arisen in connection with property loss databases have been addressed in various states in a satisfactory manner.

Birny Birnbaum, director of the Center for Economic Justice in Austin, Texas, criticized the bill from the opposite direction, asserting that it failed to provide any meaningful consumer protections.

He said that the answer to carriers refusing to underwrite properties with significant loss histories should be more property inspections to determine that the problems were properly corrected.

The model's sponsor, Rhode Island State Sen. David Bates, R-Barrington, said that as an insurance agent he is often embarrassed to tell applicants that he cannot provide insurance because of loss history on the property.

"I can sit down and tell whether someone is a good person to insure," he said. "Now all of a sudden we are dealing with this house they are buying with a loss coming into play that happened three years ago."