Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 9, 2021

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“OK, Mrs. Thompson, your premium is going to be a very favorable…oh, wait a second…I am seeing an insurance claim you filed a few years back on your homeowners insurance. That’s going to significantly impact your premium.”

If you’ve heard this or anything like the scenario above, or anything such as the statement, “you still have an open claim with your other insurer, so I can’t issue a new policy for you,” you’re not alone.

Thousands of Americans hear these phrases cross the lips of their prospective insurance agents every day.

But what if the claim never occurred, you weren’t paid a dime (because the damage was less than your deductible) or was actually from the previous home or vehicle owner? Unfortunately, your agent can’t just take your word for it and move on at the lower, claim-free premium.

How does this happen?

It sounds like a situation that shouldn’t be possible, considering the sensitive nature of filing a claim. Typically it’s after an accident of some kind, when a person is feeling mentally distraught, and sometimes physically injured. The last thing they need to hear is that they’re going to end up paying more in the process of getting their life back together.

Insurance companies, most of them anyway, subscribe to a service called C.L.U.E, which stands for ‘Comprehensive Loss Underwriting Exchange’. The C.L.U.E. report can be thought of as a service insurers use to “trust but verify” our claims history other than just taking our word for it.

You see, all insurance companies report accidents to this ‘data dump’, which means they can all share the details of our collective claims history, and charge us accordingly. Imagine that the companies are able to pass these claim documents of yours back and forth – it’s that easy for them to see what you’ve been up to because it’s all digital. The type of claim filed doesn’t matter, and it doesn’t matter which agency you go through – they al act as partners in terms of data.

There is no such thing as filing a claim and switching insurance companies in order to avoid the increase in insurance premium.

Unfortunately, there is a lot of room for human error here, and any number of events can happen that lead to misfortune. People forget to ‘close’ claims which leads to an inaccurate claim status, an address is entered incorrectly, or your name simply comes up as a ‘potential’ match for a vehicle damage claim because you were the previous or subsequent owner.

Either way, unlike the justice system, you’re guilty until proven innocent here.

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What can you do?

It’s not your fault, and yes, it’s a pain in the butt.

But what you need to do is contact the insurance company that insured you at the time the claim was reported and demand a ‘letter of experience’ clearing you of the pesky claim that is causing you such a headache.

The LOE, as it’s referred to in insurance circles, is the equivalent of a letter from your mom (in this case the insurer) that says you either didn’t file the claim, it’s closed, nothing was paid out, or you never owned the vehicle/home in question.

This letter may take between three to five business days to produce. So if you’re in a hurry to get the new policy, you may have to bite the bullet until the letter shows up.

Your new insurance company will ‘credit’ you whatever you deserve when your innocence is proven.

What’s the final word?

The same thing can happen with your MVR report. This is the report that details your driving record (not claims history).

Mistakes are made here as well, although the recourse is more of a pain, although significantly less common.

No matter what your driving record or claims history, it’s advisable to get insurance quotes online and visit an independent insurance agent to find a premium that works best for you. While you shouldn’t ever put your partnership with your current provider in jeopardy by flaking out in the middle of a claim process, if you think you’re overpaying, you can find a different provider. Being partners in business means that you need to be honest with them, but it also should mean that they don’t overcharge you.

If you’re looking to save money on your monthly expenses, look at what other options are out there, and whether or not you’d benefit from a change. A potential claim shouldn’t end up breaking the bank, and you want to ensure that you’re as protected as possible.