Do Car Insurance Companies Share Information?

Car insurance companies actively engage in information sharing within the industry, a practice that often sparks public curiosity regarding the handling of personal data. This exchange of information is a fundamental aspect of how insurers operate, influencing policy pricing and fraud detection. Understanding the types of data shared, how it’s exchanged, its purposes, and consumer privacy rights provides clarity on this widespread industry practice.

Types of Data Shared

Car insurance companies collect and share various categories of data to assess risk and administer policies. This includes:

• Personal identifying details: Name, address, date of birth, gender, marital status, and geographical location.
• Vehicle-specific information: Make, model, vehicle identification number (VIN), age, safety features, and annual mileage.
• Driving record: Traffic violations, accidents, license status, and driving-related convictions or tickets.
• Claims history: Type of loss, amounts paid, and at-fault determinations from past insurance claims.
• Credit information: Credit-based insurance scores reflecting payment history, outstanding debt, and credit history length. This score helps predict the likelihood of future claims.
• Telematics data: Collected from in-car systems or connected car apps, offering insights into driving behavior such as speed, braking patterns, hard acceleration, and GPS location.
• Previous insurance policies: Coverage limits and premiums.

How Information is Exchanged

Information exchange within the car insurance industry primarily occurs through specialized industry databases and third-party data providers. The Comprehensive Loss Underwriting Exchange (CLUE) database, maintained by LexisNexis Risk Solutions, is a central repository for claims history, accidents, and traffic violations, typically retaining data for up to seven years. Insurers access CLUE reports to evaluate an individual’s risk when underwriting new policies or renewing existing ones.

State motor vehicle departments (DMVs) provide motor vehicle reports (MVRs) that detail a driver’s history of violations and accidents. The National Motor Vehicle Title Information System (NMVTIS) collects information from insurance carriers regarding total loss and salvage vehicles, aiming to prevent fraud and ensure disclosure in vehicle sales.

Beyond these specific databases, a network of third-party data providers and aggregators, such as Verisk Analytics, CoreLogic, and other divisions of LexisNexis, compile and supply extensive consumer data to insurers. These providers gather a wide range of information, including credit scores, driving records, and telematics data, which insurers then integrate into their assessment processes. While direct sharing of sensitive data between competing insurance companies is not the norm, they access the same reporting agencies and shared systems to obtain necessary information. Regulatory bodies and law enforcement agencies can also access certain information when legally mandated, ensuring compliance and aiding in investigations.

Purposes of Data Sharing

The primary purpose of data sharing among car insurance companies is to facilitate accurate underwriting and risk assessment. By accessing a broad spectrum of information, insurers can determine an applicant’s eligibility for coverage and set appropriate premiums that reflect their individual risk profile. This helps ensure that premiums are proportional to the likelihood of an insurance loss.

Data sharing is also a significant tool for fraud detection and prevention. Insurers use shared information to verify the accuracy of details provided by applicants and claimants, helping to identify any misrepresentations or fraudulent activities. This verification process aids efficient claims processing, allowing insurers to confirm accident details, review previous claims, and determine liability more effectively.

The collective data aids in rate setting and actuarial analysis, enabling insurers to adjust their pricing models based on observed trends and individual risk factors across their policyholder base. Furthermore, sharing information helps insurers comply with various legal and regulatory requirements, such as those under the Fair Credit Reporting Act. While less common for direct sharing between competitors, some data may be used for marketing and customer segmentation, often within an insurer’s own affiliated companies.

Consumer Privacy and Rights

Consumers have specific privacy rights concerning their personal information held by car insurance companies, primarily governed by federal laws. The Gramm-Leach-Bliley Act (GLBA) requires financial institutions, including insurers, to explain their information-sharing practices to customers and provide opt-out choices for certain types of sharing. This ensures transparency in how data is handled.

The Fair Credit Reporting Act (FCRA) is a federal law that protects the accuracy and privacy of information in consumer reports, which insurers frequently use. Under FCRA, insurers have a “permissible purpose” to access credit information without explicit consent for underwriting and rating purposes. If an adverse action, such as a higher premium or policy denial, is taken based on a consumer report, insurers must notify the individual and provide the name of the agency that supplied the information.

Consumers have the right to access and dispute inaccurate information in reports maintained by consumer reporting agencies. For instance, you can request a free copy of your CLUE report from LexisNexis once every 12 months. If you find errors, you can dispute them directly with LexisNexis, which is required to investigate the discrepancy. You also have the option to add a personal statement to your report to explain any entries. Reviewing privacy notices provided by insurers helps consumers understand their data rights and any available opt-out options for specific data uses, such as marketing.