Certain CLUE requests create privacy issues.
By Kip Kobussen
Chief Legal Counsel
An agent recently asked a General Casualty underwriter to produce a Comprehensive Loss Underwriting Exchange (CLUE) report for property the agent's insured wanted to buy. The underwriter believed the request was being made to evaluate the insurability of the property, particularly concerning water losses. From the CLUE report the potential purchaser would have been able to determine if the property had any water loss claims in the last five years. The underwriter declined the request.
The use of information by insurance companies and agents, whether that information relates to a customer or non-customer, has recently been a point of great debate and high legislative interest. Financial services companies, including insurance carriers and agencies, are generally required to disclose their policies concerning the handling of customer information. They are also required to advise their customers if information is shared with unaffiliated third parties. While privacy laws were not typically meant to control disclosure of claims data, most companies are justifiably sensitive about disseminating customer information and have developed policies controlling when and how information is gathered and distributed.
As important, vendors that provide this information have policies concerning its dissemination. This is because the sale of this information is the company's source of revenue. Also, because the data these companies collect and sell might be considered private personal information, they have become targets for legislative efforts aimed at controlling the availability of such information. While insurance carriers believe that credit information and claims history are important underwriting factors that help predict loss potential, certain special interest groups feel use of this information negatively affects the insurance-buying public and have sought restrictions on its use.
For these reasons, most contracts between insurance companies and information providers restrict the use of this information to insurance transactions. Requesting a CLUE report for an agency customer as part of a property purchase evaluation is not within the definition of an "insurance transaction." Such a request would therefore not be within the bounds of company agreements, so insurance carriers must decline such requests.*
Due to the sensitivity of information found in CLUE reports, companies and the agencies that represent them must be careful about their use and dissemination of this information. Making certain that the request is related to an insurance transaction is critical to having an effective, privacy-conscious information handling policy.
*Consumers can get copies of their credit and claims loss reports for a nominal fee, and insurance and real estate agents could explore direct purchase of these reports for their clients. ChoicePointTM CLUE reports can be ordered online through www.choicetrust.com.
About the author: Kip Kobussen, chief legal counsel, has been with General Casualty for 14 years. He is a member of the American Bar Association, the State Bar of Wisconsin and the American Corporate Counsel Association.
For more information please contact Anne M. Smith.