10 Jan 2011

Credit Bureaus Determine Whether You Get Insurance

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Adv Randolph Samuel @ Lucid Living

If you think credit bureaus only keep your credit information, you’re wrong.

TransUnion credit bureau, manage the Insurance Data System (IDS). Short-term insurance companies publish policy and claims information to this system. The IDS keeps a record of all your insurance activity. This includes – insurer (with whom and for how long you were insured), cover (what is insured), claims (frequency, value and outcome) and various risk indicators (e.g. fraud).

When you apply to a new insurance company to cover your home contents, motor vehicle or personal effects, you are required to consent to the insurer sharing your information with TransUnion credit bureau– who in turn shares this information with all insurers. This in effect is a waiver of your right to privacy, over your information. Because of the far-reaching implications of this waiver, this provision is almost never highlighted or explained to you – camouflaged in the “fine print”.

Each time there is an “event” on your policy the information is transmitted to the IDS. Take the processing of a claim, to illustrate how the system works.

  • You register a claim on your policy.
  • The claim is rejected because the insurer alleges fraud.
  • Your insurance policy is cancelled.

When you approach a new insurer and apply for cover the insurer looks up your information on the IDS and discovers that your last policy was cancelled due to “fraudulent claims”.  The insurer denies you insurance cover.

Why do I need to know this?

Let’s stay with the fraudulent claim example. In the majority of instances, when an insurer rejects a claim on the basis of fraud, they never proceed to institute criminal action. The insurer determines, based on its self-defined procedures and standards, whether or not you committed fraud. This is not the “legal standard” and it is not determined by an objective 3rd party (e.g. a court). Bear in mind, insurance companies have a vested interest in rejecting claims. The information is then recorded on IDS, without you being notified thereof or having the opportunity to dispute it. Your reputation is smeared, on the strength of an allegation.

If you have seen your credit report from TransUnion credit bureau, you will know that no information from the IDS is reflected thereon. You are therefore unaware of this information, cannot challenge any inaccuracy or dispute the validity – yet it determines whether or not you get insurance cover.

How do I find out what my IDS record is?

You ask for it.

TransUnion credit bureau, like all registered credit bureaus, is legally compelled to disclose this information to you. Furthermore, you are entitled to challenge the accuracy and validity of the information.

This information is a powerful tool. It will allow you to discover why you are being declined insurance cover, why your premium is excessive and why your excess is high.

By correcting inaccurate or invalid information on IDS, you can reinstate your good name and save money.

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