In the process of applying for an auto policy, insurance companies may collect some or all of the following information for purpose of issuing (underwriting) your policy:

 

1. Credit History: Many preferred and standard insurance companies use credit based insurance scoring in order to determine the exact premiums of a particular motorist. Insurance statistics found some positive correlation between higher claims and insureds  with poor credit. Some well known companies may even reject applicant for the simple fact that you have very bad credit (such as a recent bankruptcy.) If the wife has better credit than the husband some insurers may give lower prices for the same coverage if the wife was listed as the main applicant, and not the husband. Other companies may 'average' the credit of the two spouses.

 

Most non standard insurance companies do not use credit based insurance scoring. Some standard carriers that use credit based insurance scoring may have additional insurance programs that do not check the credit but provide limited liability coverage (maybe state limit as a maximum, to reduce risk associated with insuring people with poor credit.)

 

2. MVR. It stands for Motor Vehicle Report, a document that lists the driving record history of individuals for a specified period of time (ie 5 years.) The report is kept and updated by the motor vehicle department of the state.

 

When a motorist  gets convicted by for traffic violation such as speeding, DUI, reckless driving, etc. the incident becomes an entry in that motorist's MVR, along with certain penalty points to reflect the seriousness of the violation. One aspect reflecting the importance of the MVR is that the vast majority of insurance companies use it in determining the premium for a certain motorist. Also, some employers rely on it in screening/ selecting potential  employees.

 

3. C.L.U.E. Report. C.L.U.E. (Comprehensive Loss Underwriting Exchange) is a claims history database created by ChoicePoint, a company that enables insurance companies to access consumer claims information when they are underwriting or rating an insurance policy. The report is based on information collected from insurance companies such as name, date of birth, and policy number. The report also includes information about prior claim such as date of loss, type of loss and amounts paid, and a description of the vehicles/property covered. The report does not include any moving violations, tickets or accidents, and it does not provide any credit history information. Examples of things you may find on the CLUE report include: claims that are made for stolen vehicles, hit and run claims, vehicles caught on fire, vehicles hit while being driven by another motorist, etc.)

 

4.  The Application. The application that is normally taken from you at the time of applying for new auto insurance is the most significant source of updated information about you. While the applications questions may slightly vary from one insurer to another, most applications are geared toward collecting updated information about potential operators in the household, their driving record, address, marital status; some health questions relevant to ability to drive, etc.  While insurance companies may access information about insurance applicants from other parties, applicants are held responsible for the validity and accuracy of the information they provide on the application.

 

When applicants provides incorrect information on application (whether on purpose or not on purpose), a case of misrepresentation has occurred. Material misrepresentation refers to the situation in where of the truth had been disclosed by the applicant, the insurance company would not have issued the auto policy, or would have issued it differently, or would have issued it with limited benefits or a higher premium. Misrepresentation in auto insurance application can give the insurance company the right to rescind the contract (cancel policy for the date it was effective, like no coverage ever took place.) The material misrepresentation defense is a strategy that has long been used by insurance companies to defeat claims. Although carriers use the term "material misrepresentation defense," lawyers for policyholders refer to it as "post-claims underwriting." Regardless what it is, applicants need to be carefully accurate when they provide information to insurance companies. That way they are fair to themselves, and fair to their insurer.

 

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