What Is a Consumer Report for Insurance?

A consumer report is a compilation of personal information that insurers use to evaluate an individual’s potential risk. These reports provide a detailed overview of a consumer’s history in specific areas relevant to insurance coverage. Their general purpose is to help insurers make informed decisions about whether to offer coverage and how to price policies. This information allows for a more accurate assessment of the likelihood of future claims or losses.

Types of Consumer Reports in Insurance

Insurance companies commonly utilize several types of consumer reports, each containing distinct information used to assess risk. These reports offer different perspectives on an individual’s history that can influence insurance decisions.

The credit-based insurance score is a numerical value derived from a consumer’s credit history. This score predicts the likelihood of an individual having an insurance loss and filing a claim. It is distinct from a traditional credit score, which primarily predicts creditworthiness and repayment ability. Factors influencing an insurance score include payment history, the length of credit history, applications for new credit, the number and types of accounts, and outstanding debt.

Motor Vehicle Reports (MVRs) provide an overview of an individual’s driving history. These reports contain information about traffic violations, accidents, and the status of a driver’s license. MVRs reflect activity from the past three to five years, giving insurers insight into a driver’s recent behavior on the road. This information is crucial for auto insurance.

Claims history reports, such as the Comprehensive Loss Underwriting Exchange (CLUE) report, detail an individual’s past insurance claims. LexisNexis compiles CLUE reports, which cover personal auto and property claims history for up to seven years. These reports include information such as the policyholder’s name, date of birth, policy number, date of loss, type of loss, and the amount paid on claims. For homeowners’ coverage, the report specifies the property address, while auto coverage includes vehicle information. The A-PLUS report compiled by ISO also provides claims data.

How Insurers Utilize Consumer Reports

Insurance companies apply information from consumer reports in several ways. These reports are integral to the underwriting process, premium calculation, and overall risk assessment. The use of these reports is subject to various regulations, ensuring consumer protection.

Insurers use consumer reports to make underwriting decisions. The data in these reports helps them evaluate the likelihood of future claims or losses. For instance, a history of frequent claims or severe driving violations indicated in a CLUE report or MVR may lead an insurer to decline coverage or offer it with specific limitations.

Information from consumer reports influences the calculation of insurance premiums. A higher credit-based insurance score, for example, indicates a lower risk of future claims, which can result in lower premiums for the policyholder. Conversely, a history of accidents or traffic violations on an MVR points to a higher risk, leading to increased insurance costs. Insurers aim to align premiums with the perceived risk of each policyholder.

These reports are central to an insurer’s risk assessment process. By analyzing the data from credit-based insurance scores, MVRs, and claims history reports, insurers can classify individuals based on their potential for future losses. This comprehensive data allows companies to predict the probability of an insured event occurring and the potential cost associated with it.

Accessing and Correcting Your Consumer Reports

Consumers have specific rights concerning their consumer reports, primarily governed by the Fair Credit Reporting Act (FCRA). This federal law promotes the accuracy, fairness, and privacy of information maintained by consumer reporting agencies.

The FCRA grants consumers the right to access free copies of their consumer reports. For credit-related reports that may impact insurance scores, individuals can obtain one free copy every 12 months from each of the three nationwide credit bureaus (Equifax, Experian, and TransUnion) by visiting annualcreditreport.com. To request a free CLUE report, consumers can contact LexisNexis directly online or by phone. Obtaining a Motor Vehicle Report (MVR) involves contacting the state’s Department of Motor Vehicles or a similar state agency.

Consumers also have the right to dispute any inaccurate or incomplete information found in their reports. If an error is identified, the consumer should contact the reporting agency directly and provide supporting documentation. The consumer reporting agency is required to investigate the dispute and correct or delete any information that cannot be verified within 30 days. Correcting errors is important because inaccurate information can negatively impact insurance rates or eligibility for coverage.

If an insurance company takes an adverse action, such as denying coverage, increasing premiums, or terminating a policy, based on information in a consumer report, they must provide a specific notice. This notice must include the name, address, and phone number of the consumer reporting agency that supplied the report. It also informs the consumer of their right to obtain a free copy of that report and to dispute its accuracy.