AIA: N.D. Loss History Bill Goes too Far

April 7, 2005

The American Insurance Association (AIA) on Thursday said that North Dakota’s SB 2186 goes too far in regulating the use of loss history reports for homeowners insurance and plans to ask Gov. John Hoeven (R) to veto the legislation.

“While the bill was conceived with good intentions, it may very well produce the unintended consequences of hindering insurers from fairly underwriting risks,” said Steve Schneider, AIA vice president, Midwest Region. “We would much prefer North Dakota wait and consider the soon to be released National Conference of Insurance Legislators Model Law on the use of loss history information. It will likely be an acceptable compromise that achieves balance in the marketplace.”

According to AIA, SB 2186 goes beyond any other current or proposed loss history regulation or law in the country. If enacted, it would conceal property losses and property damage that otherwise ought to be reported from insurers and limit the history of claims that may be investigated to determine if fraud may be involved.

“The bill hides information about property claims and losses from insurers and consumers, leaving them less educated about the true insurance risk of a home, and it opens the door for an increase in fraudulent claims,” added Schneider.

Loss history information databases such as C.L.U.E. (Comprehensive Loss Underwriting Exchange) contain information about claims filed on properties in the U.S. These databases enable insurance companies to access prior claim information in the underwriting and rating process. More than 90 percent of insurers writing homeowners coverage provide claims data to such databases.

AIA noted there also is a strong correlation between a particular property’s claims history and the probability of additional losses at that location. Properties with a history of claims are likely to have more claims filed in the future.

SB 2186 was passed by the Legislature on April 1.

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