C.L.U.E.

[Jo Clute]

Do you have a Clue about CLUE?

C.L.U.E. (Comprehensive Loss Underwriting Exchange) is a service offered by ChoisePoint Asset Company to help insurance companies lower their risks when underwriting homeowners policies. These are reports from a database subscribed to by an increasing number of insurance companies regarding claims and perceived risks.

I run into a few people who have heard of this database; but most people don't really know how it might affect their lives. I'm especially concerned about how this information can impact the insurability or premium costs for homes that are currently on the market. (Homes that you might be involved with in your real estate transactions.)

Most of the data kept by ChoisePoint are attached only to the individuals who have purchased insurance and who have filed claims. That information follows them wherever they go-much like their credit reports. However, some data stays attached to specific addresses and can have negative effects regarding premiums or insurability for the next owners. 

Buyers can be affected.

When buyers go to their closings for purchasing homes, their lenders require "binders" for homeowners insurance. However, these binders are merely estimates by insurance companies. The insurance companies are not bound by these estimates or promises to underwrite a particular policy. In fact, insurance companies have a couple of months to complete their "due diligence" regarding their underwriting. (Granted, some insurance companies are starting to look at C.L.U.E. reports and other factors before they issue a binder; but many do not.) That can leave buyers "holding the bag" if the insurance companies discover negative claims histories after the closings. (I've heard of home buyers finding themselves with surprisingly higher premiums, or with no insurance at all, after their insurance companies finally look into the database. And as you know, mortgagees insist on insurance being in place to protect their collateral. Having a mortgage company purchase homeowners insurance for the new owners is never a good experience, as they don't really care how much it costs . they simply pass the cost through to the buyers.)

Because the insurance industry has been paying large claims and court settlements regarding mold and mildew remediations, they perceive any claim involving water as a high risk for future possible losses. Therefore, if any claims data is found for a particular address involving a flood, a leak, or a fire (which is usually put out with the use of water); prospective buyers should be aware that their premiums could end up being much higher than their insurance agents first estimate, once the underwriters research their data.

Therefore, I strongly urge real estate agents to consider having their clients obtain C.L.U.E. reports regarding specific properties, as soon as possible. 

Sellers can obtain their own reports.

Sellers have the right to obtain these reports on their own properties. The reports can be obtained through ChoisePoint at a cost of $19.95, each, at the following web address:  

http://www.choicetrust.com/servlet/com.kx.cs.servlets.CsServlet?channel=home&product=ror&subproduct=order&anchor= . 

A Seller's C.L.U.E. report can also be ordered through the mail by sending the necessary information to:  

C.L.U.E. Inc. Consumer Disclosure Center
P.O. Box 105295
Atlanta, GA 30348-5295

Buyers can take action.

If sellers (or their listing agents) are not making the reports available to serious buyers in a timely fashion, I strongly suggest having the buyers obtain reports through their own insurance agencies as soon as possible after their purchase offers are accepted. (I doubt that their insurance companies will charge them any fees for these reports.)

Advice for Homeowners.

Think twice about having an insurance company cover any of your smaller losses, as those losses may end up costing you many times more in the future through increased premiums. Although your insurance sales agent may have touted the policy's ability to cover small claims, the company's accountants are watching loss data very carefully.

Insurance companies have the right to cancel your insurance (or not renew it) after even one claim. Most people don't know that! There is no state-sponsored "back up" insurance for homeowners like there is for automobile insurance.

Now that the C.L.U.E. database is helping insurance companies forecast higher risks, any water-based claims could even impact the future marketability of your house. Therefore, don't even call your insurance company to inquire about possibly filing a water-based loss claim unless you consciously choose to have that information in their database.

Consider purchasing you homeowners insurance at the highest deductible rate your mortgage contract will allow. (Since you should plan to not use the insurance for small losses, anyway; why pay extra premiums for low deductible amounts?)


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