Do Insurance Companies Share Information With Each Other?

Insurance companies routinely exchange information, a standard practice that supports their operations and risk management. This sharing occurs through established systems and databases, allowing insurers to gather comprehensive data on individuals and properties. The practice helps in various aspects, from accurately assessing risk to preventing fraudulent activities.

Information Shared

Insurance companies collect and share various types of information. This includes details about past insurance claims filed by an individual or on a specific property or vehicle. This claims history provides insurers with insights into an applicant’s past loss experience.

Information about current and previous insurance policies, such as coverage limits, effective dates, and any cancellations, is also shared. This policy history helps a new insurer understand an applicant’s past insurance relationships.

Basic personal identifiers like names, addresses, and dates of birth are consistently shared. Driving records, obtained from state motor vehicle departments, provide data on traffic violations, accidents, and license status for auto insurance underwriting. Many insurers also use credit-based insurance scores.

Medical information, particularly for life and health insurance, requires explicit consent from the individual for sharing.

Purposes of Sharing

Information sharing among insurance companies serves several purposes. A primary reason is to assist with underwriting and risk assessment, helping insurers evaluate risk and set appropriate premiums.

Detecting and preventing fraud is another purpose for sharing data. By cross-referencing information, patterns of fraudulent claims or applications can be identified. Shared data also aids in claims verification.

This collaborative data environment helps maintain the financial stability of the insurance market. Aggregated data can also inform broader strategies for loss prevention, benefiting both insurers and policyholders.

Sharing Systems and Databases

Insurance companies use systems and databases for information exchange. One prominent system is the Comprehensive Loss Underwriting Exchange (CLUE), maintained by LexisNexis. CLUE reports contain up to seven years of claims history for both auto and home insurance policies, providing details like dates of loss, types of claims, and amounts paid.

For life and health insurance, the Medical Information Bureau (MIB) serves as a central resource. The MIB collects coded information from previous life, health, disability, and long-term care insurance applications to detect fraud and omissions during the underwriting process. Over 800 life insurance companies in the U.S. and Canada are part of the MIB network.

Insurers also access driving records directly from state motor vehicle departments to obtain information on traffic violations and accident histories. Credit bureaus provide credit-based insurance scores, which insurers use as a factor in assessing risk and determining premiums. Beyond these specific systems, industry associations and direct insurer-to-insurer exchanges facilitate sharing for purposes like aggregated statistics, subrogation, or co-insurance arrangements.

Consumer Rights and Privacy

Consumers have rights regarding the privacy of their information shared within the insurance industry. The Gramm-Leach-Bliley Act (GLBA) requires financial institutions, including insurance companies, to explain their information-sharing practices and safeguard sensitive data. Insurers provide privacy notices detailing their data collection and sharing policies.

The Health Insurance Portability and Accountability Act (HIPAA) governs the use and disclosure of protected health information (PHI), particularly relevant for health and life insurance. HIPAA allows for information sharing under specific criteria, especially for treatment, payment, and healthcare operations, often without explicit patient consent for these purposes. However, strict safeguards are required to protect this sensitive data.

Consumers have the right to request a copy of the information held about them by consumer reporting agencies, such as those that generate CLUE or MIB reports. They can also dispute inaccuracies found in these reports, which the reporting agency must then investigate. While consumers may have limited opt-out options for certain types of data sharing with non-affiliated third parties, particularly for marketing purposes, this right does not extend to information shared for core insurance operations like underwriting or claims processing.