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UPDATED: Mar 13, 2020
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There is a certain degree of competition within the car insurance industry as companies fight against one another for a share of the market.
Although some companies want to hold the greatest possible share of the market, others care more about premiums.
While some competitors ensure anonymity and keep their clients’ information secure from the eyes of others, some companies do, in fact, share information, and they don’t do it to be nice.
By using a database that contains information about each policyholder, companies can benefit from knowing more about the applicant prior to determining whether or not the applicant should be approved for a policy.
In fact, many states require any car insurance companies to report a minimum amount of information to this database in order to continue selling insurance products to its customers.
Compare car insurance quotes to find the best deal for the coverage you need. Enter your zip code above to get started.
Who benefits by sharing customers’ information?
In short, every insurance company has something to gain by using this database.
Although a provider isn’t going to hand over information to its competitors about how to contact its own customers, it does make sense for a provider to share information after this customer has started shopping for car insurance quotes.
All insurance companies can benefit by voluntarily participating in this exchange of information since the details they find will help the provider give the most accurate quote and rates to the applicant.
The underwriter can see if the applicant’s rating must be adjusted due to falsifying information or if he or she has been honest throughout the policy. All providers can log in to this system and view the same information, so the playing field is equal for all parties.
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How do these reports affect an applicant’s rating factors?
Insurance companies use more than just one or two rating factors when determining their premiums.
Although some of these factors are well-known such as driving history, age, and vehicle type, there are other factors that have an effect on rates of which consumers are unaware.
Above all, always be honest when shopping for a quote. If you’re dishonest on your application because you believe that you can trick the insurance company and save money, don’t be surprised when your quote increases by 30 or 40 percent.
Although not every little fact can be verified, providers know more than you think. Details on a verification report may affect factors such as:
- Start and ending dates that indicate how long the policyholder has been with a provider
- Cancellation dates that indicate a lapse in coverage
- Claims previously under investigation for fraud or multiple comprehensive claims
- Drivers who have filed insurance claims on the vehicle but who aren’t included on the new application
- More than one non-fault accident that can alter the applicant’s risk classification from preferred to standard
- At-fault accidents that are chargeable but not included on the application
What is the CLUE system?
The Claims Loss Underwriting Exchange, or CLUE, is the database that includes records from policyholders across the country.
Both drivers who personally request their driving history and all insurance providers with accounts can access the database.
In most cases, a CLUE record is updated when a claim is filed, settled and closed.
There is a cost for insurance companies to pull a CLUE report, which is why most won’t do so if you’re only comparison shopping.
Essentially, they don’t want to waste the money on you if you’ll ultimately go with another company. LexisNexis, the agency responsible for reporting this data, is a for-profit company that earns its revenue by reporting and maintaining information.
The actual process of obtaining a report is simple. Some companies hand over authority to run these reports to the underwriters who will be assessing the applications, while others allow their agents to pull reports as they are finalizing applications.
Carriers usually have some type of internal system to order these records, and in many cases, the company builds the system into its quoting tool to make sure that everything is easily included in the report.
For instance, the applicant may be asked to provide the following information:
- driver’s license number
- vehicle identification number
What do I do if there is inaccurate information on my report?
No system is 100 percent foolproof, and mistakes are bound to happen.
If someone accidentally labels a car crash as an at-fault incident rather than a not-at-fault incident while inputting your information, you’ll probably have some trouble when you try to find a new insurance provider.
Since insurance providers are required to base their decision off of what’s in the CLUE report, they’ll need to request documents to fix what’s in the applicant’s file.
In most cases, the applicant will be asked to get paperwork from his or her prior provider that says the information on the record is an error.
If you’re trying to update your file, contact the company who initially reported the data and ask them to write a Letter of Experience, and make sure you have a copy of the letter so you have proof of the error.
Is there any other information that the insurance company will need to verify?
What do you do when the new provider needs to verify older information that happened before your previous insurance policy? The new insurance company will need to check your driving and car history to see if any unlisted infractions stand out.
For instance, if you have a major violation within the past five to seven years or a minor infraction within the last 36 months, that information must be disclosed.
If your credit history is used to determine your premium, your car insurance company will request a credit-based insurance score. This request must be made through LexisNexis, just like the CLUE report, and the score will affect your risk rating and premium.
When you’re filling out an application, be honest and enter all information as accurately as possible.
You may not receive the rate you want right away, but it’s important to shop around to get quotes from different companies before settling on one that meets your needs and your budget. Enter your zip code to shop today.