Q. After a recent storm, a tree on my property fell and damaged my neighbor's fence. I called my insurer and was told that any claim would have to be filed by my neighbor with his insurer. But two weeks later, I received a letter from my company saying my claim had been denied. I didn't file a claim. Should I be concerned?
A. Yes, because notification that you did file and were denied can mean that your insurance premium could increase, or that your policy could even be dropped altogether. That's because, at some insurance companies, merely calling to inquire about your policy is documented as making a claim, harming your record.
See also: Does homeowners insurance cover that?
I've got personal experience with this practice. Several years ago, after an unexplained hike in both my auto and homeowners insurance, I called my insurer and was told that general rates in my area had increased. But when getting quotes from other companies, I learned the truth.
A few months earlier, I'd called my insurer's toll-free number for policy questions with a query that was not addressed in my paperwork and was then transferred to a claims agent who answered my question. Never revealed to me was that this call was assigned a number as a claim. But when my renewal came, my premiums had increased because my claims-free discount had been revoked. (In addition, my supposed loss report apparently was shared with other insurers.) I took my business elsewhere — to a storefront agent — and restored that discount after proving I never filed a claim.
Certainly, not all insurers use innocent inquiries as an excuse to raise rates. But it's among the tricks of the trade detailed in a report (pdf) by the American Association for Justice, an advocacy group of lawyers who often represent policyholders in disputes with insurance companies. I've heard of similar experiences from other people.
I asked the Insurance Industry Institute, the industry's trade group, how common this practice is, and what its rationale is.
Spokeswoman Loretta Worters responded that most companies only submit a loss-history report if a claim is opened, so inquiries usually don't count. "However, some companies treat all inquiries as reportable because from their perspective, you typically don't call with a hypothetical question. It's best to find out from your insurance agent or company representative what the company's policy is on claim inquiries."
The way I see it, the best way to sidestep this trap is to not call your insurer's toll-free number at all. If you have an insurance agent, you should ask that commissioned rep any policy questions. The agent will want to keep your business and is less likely to automatically assign a claim number than an unknown employee at insurance company headquarters. Policyholders without agents should first pull out their policy documents and see whether their question is answered there.
But if you must phone the toll-free number, know that your call is likely being recorded — and, as with the police, anything you say may be used against you. So repeatedly say that you are "calling with a hypothetical question — and not to file a claim."
It's also a good idea to tape the call — though in several states you are legally required to have the other person's consent — and to keep the recording for possible later use. Recording devices for phones are sold in electronics stores for about $25.
In subsequent weeks, watch for a letter from your insurer. And get a copy of your CLUE (comprehensive loss underwriting exchange) report. Available for free once a year to consumers, it comes from an industry-wide database that details home and auto insurance claims listed under your name over the past seven years.
If your call was interpreted as a claim, you should see a notation of that on your report.
If your premium rises or you suspect it might, first write a letter to your insurer, detailing the specifics of your call, This should include the questions asked — to whom, when and why — and the answers received, and how you expect the company to correct your record.
Mail copies to the rep with whom you spoke and the company's homeowner claims office, and copy your state's insurance commissioner and the Better Business Bureau. You may also be able to file an online complaint with your insurance commissioner.
Follow up until the company does what you want. Don't assume it will automatically happen.
Two final tips:
- Because insurers use the CLUE report to decide whether to issue you a policy and set your rate, it's a good idea to look at it whenever you're shopping for new homeowners or auto insurance — or just wondering what insurers say about you.
- It's generally good to pay for smaller repairs yourself, because any claim, especially on homeowners insurance, might result in higher premiums or a refusal to renew your policy.
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Sid Kirchheimer writes about consumer and health issues.