BILL NUMBER:  S1194

 TITLE OF BILL :
An act to amend the insurance law, in relation to discrimination based
on inquiries


 PURPOSE OR GENERAL IDEA OF BILL :
To prohibit insurers from penalizing consumers for making inquiries
about their policies.

 SUMMARY OF SPECIFIC PROVISIONS :
Would create a new· insurance law section (2616) to prohibit insurers
from reporting inquiries about coverage under a homeowners', personal
lines fire, or private passenger motor vehicle insurance policy to any
insurance support organization or company that maintains an insurance
claim history data base for the collection and distribution of claim
data.

Would prohibit insurers from refusing to issue or renew a policy,
charging a higher premium or assigning to a more expensive affiliate
or rating tier any insured or applicant on the basis of any inquiry
about a homeowners', personal lines fire, or non-business motor
vehicle policy to the insurer or previous insurers, or on the basis of
insurer reports of such inquiries to any insurance support
organization or company that maintains a claims history data base.
              

 JUSTIFICATION :
Policyholders who check with their insurance company to ask questions
about their policy or whether a loss is covered may mistakenly believe
that there will be no adverse consequences if they do not submit a
claim. However, some insurers record inquiries as unpaid losses or
claims, and may non-renew their own customers, refuse to insure new
applicants or charge a higher premium based on these inquiries,
whether or not a loss occurred or is revealed that would be covered
under the policy, whether or not a problem has been resolved, and even
if a claim is never filed or paid.

Insurers report these inquiries to insurance claim history databases
such as the Comprehensive Loss Underwriting Exchange (CLUE), operated
by ChoicePoint, Inc., or the Automobile-Property Loss Underwriting
System (A-PLUS), operated by the Insurance Services Organization.
Inquiries remain on a consumer's "CLUE report" along with any actual
claims for five years. Most insurers check CLUE reports to underwrite
and rate new applicants for coverage. For homeowners' insurance, CLUE
reports track both the consumer and the property, so a consumer can be
penalized by inquiries on a CLUE report for a previous residence which
the consumer did not own, or for a new property the consumer is
buying.

Most consumers are unaware of these databases unless they complain or
inquire about an adverse underwriting or rating decision. A consumer
can purchase his or her CLUE report and attempt to get it corrected,
but only the reporting insurer has the power to change a CLUE report,
which it often refuses to do.

The consumer's only recourse is to submit a notation for inclusion in
the report.

Consumers should not be penalized for an innocent inquiry or
disclosure of a loss that insurers incur no expense to investigate or
pay to address.  Consumers often choose to fix and pay for damage
themselves rather than submit a claim, and are forced to do so if
after an inquiry, it is discovered the loss wouldn't be covered by the
insurer anyway, often because the value of fixing the damage falls
within the insured's deductible.
Realtor and consumer groups have criticized insurer use of CLUE
reports for the unfairness and deceitfulness of reporting consumer
inquiries to a national loss database without the consumer's knowledge
and over which the consumer has little control, drawing negative risk
conclusions from simple inquiries or problems that may no longer exist
and for which the insurer incurs no expense to investigate or address,
and the disruption in property sales when companies refuse to issue
policies based on CLUE reports. States such as Texas and California
have moved to restrict insurer use of CLUE reports after record high
consumer complaints about aggressive non-renewals and difficulty
finding affordable homeowners' coverage.

 PRIOR LEGISLATIVE HISTORY :
A.11362 in 2003-04, A.3343 in 2007-2008

 FISCAL IMPLICATIONS :
None.

 EFFECTIVE DATE :
Thirty days after it shall have become law.