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The Claims Game: Your Questions Can Be Costly

When my insurance bill arrived for renewal, the premium had gone up. Since neither my wife, our kids nor I had ever filed a claim, had an auto accident or even gotten a traffic ticket, I wanted an explanation. I called AIG—my insurer of 10 years and the company that just a few weeks later would require a $123 billion taxpayer-funded bailout.

I was told car insurance rates were being raised around my neighborhood. That hike came on the heels of an equally puzzling increase in our AIG homeowners insurance. So when I shopped around for new coverage, a competitor offered a possible explanation for the rise in premiums: It had to do with a call I made in December 2007 to AIG’s toll-free phone number for “policy questions” with just that—a question about my homeowners’ policy.

Unbeknownst to me, that call was apparently logged as a claim—and one that was denied, to boot. This black mark resulted in my losing my “claims-free” discount, leading to higher insurance rates.

Apparently, my experience is not uncommon, says Jon Haber of the American Association for Justice, an advocacy group of trial lawyers whose members often represent policyholders in disputes with their insurance companies.

“Consumers will call their insurance company just to receive general info, and then find out months later they’ve been penalized with a false denied claim for doing so,” explains Haber. His organization recently issued “The Ten Worst Insurance Companies in America,” a report detailing how insurers deny claims, raise premiums and engage in other practices that can hurt their customers.

Officials from AIG, as well as the Insurance Information Institute, a trade group representing insurance companies, did not return repeated telephone calls to comment on this practice.

What happened? My phone call about my policy was apparently transferred to the claims department. “That’s because customer service is not trained to answer coverage questions and adjusters are more familiar with policies and claims,” explains Joyce Wilson, the claims agent who took my call last year. There, inquiries are automatically assigned a claims number, she says—at least at her company.

I have since taken my insurance business elsewhere, and I was able to prove that I never filed a claim. But it took a lot of time and aggravation … all because I made the mistake of calling with a question.

So how can you prevent this from happening to you?

* Use the company’s tape recording of your call to your benefit. Repeatedly mention that you have a hypothetical question—and are not necessarily filing a claim. Of course, it’s always better to first check your policy than to call your insurer. In my case, my question wasn’t addressed in my policy.

* Ask for an update. A couple of weeks after a telephone inquiry, seek written confirmation that you are not being penalized with a claim. Although Wilson says she mailed me a “claim denial” letter the day after my phone call, I never received it. However, I later learned other insurance companies could easily access that claim denial.

* Get a C.L.U.E. The Comprehensive Loss Underwriting Exchange is a database monitored by ChoicePoint Inc.’s ChoiceTrust program. It includes more than 40 million insurance claims that have been filed over the past five years, whether real or resulting from phone inquiries. You are entitled to review what’s in your C.L.U.E. Report file at no charge once a year.

If you think you’ve been burdened with a false insurance claim, which remains on record for seven years, first contact your insurer. You will likely be guided to a third-party company, which will allow you to file a formal dispute. You can also log a complaint with your state insurance commissioner. Or do as I did: Seek new automobile and homeowner coverage with an insurer that says it doesn’t engage in this practice.

Sid Kirchheimer is the author of Scam-Proof Your Life (AARP Books/Sterling).

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