Consumer Group Backs Protections for Homeowners Who File Legitimate Claims and Face Insurance Blackball

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Insurers Should Tell Customers About “Use It and Lose It”

Santa Monica, CA — Insurance companies should be required to disclose in advance if the company has a policy of refusing to renew home insurance policies just because a policyholder files a claim, the nonprofit Foundation for Taxpayer and Consumer Rights (FTCR) said today.

Under a common industry practice known as “Use it and Lose It,” many insurance companies punish customers by raising premiums or refusing to sell or renew a policy simply because the policyholder filed a claim in the past. In some instances insurers will not renew a customer based on the fact that they called to inquire about a possible claim, even if no claim was ever filed. And some homeowners have even been blackballed if previous homeowners at the same address had filed a claim. The industry now tracks claims history through a national database much like a credit reporting agency.

The citizen group is backing rules proposed by the California Insurance Department that would force insurance companies to disclose whether they engage in this nefarious practice. The Insurance Commissioner will hold a hearing concerning the proposed rules in San Francisco on Thursday.

People pay insurance premiums so that they have protection when they need it. They should not be punished for using the product they have paid for, said FTCR’s Harvey Rosenfield, the author of California’s insurance reform law Proposition 103. At the very least, insurance” of their product is that if you use it, you may lose it.”

Using his regulatory authority to protect consumers from unfair and deceptive practices, Insurance Commissioner Garamendi has proposed, and FTCR is supporting, new rules that would require residential property insurers to:

1) Inform consumers that if they use their homeowners’ insurance policies, they’ll lose their policies or incur premium increases.
2) Keep adequate records to justify their rate setting and underwriting practices with regard to “Use it and Lose it”, and
3) Keep records proving they have pro-actively disclosed to their customers what happens if they file a claim.

Insurers Have Fought to Protect “Use It and Lose It” Scheme

Legislation to bar “Use It and Lose It” insurance practices was blocked in the California Legislature by the powerful insurance lobby in 2003. The industry also challenged emergency regulations, proposed by the CDI in 2003 that would have banned “Use It and Lose It.” The Sacramento Court of Appeal ruled – in a decision that FTCR believes is erroneous – that the Commissioner did not have the authority to issue the regulations.

“Insurers have fought to protect the “Use It and Lose It” system, because it is a way to push up premiums while reducing the number of claims filed,” said Rosenfield. “More and more, we hear from homeowners who have legitimate insurance claims but are afraid that if they file the claim, they will lose their insurance. The industry has intimidated policyholders into not using the product and have donated to politicians to make sure no law gets in the way of this scheme.”

Tips for Consumers Concerned About “Use It and Lose It”

1. When shopping for homeowners’ insurance (or even if you are already insured), ask the company whether it reports claims that you make regarding property loss or damage to a claims history database such as CLUE (the Comprehensive Loss Underwriting Exchange) and whether the company uses such a database to make decisions regarding whether to insure you, cancel your coverage, or to raise your premiums. If possible, purchase a policy from a company that does not employ “Use it and Lose It.”

2. Contact CLUE at and order a free copy of your database file. Look for errors and make sure that any descriptions of actual claims are correct. If a company seeks to deny you or increase your premium based on a previous claim, ask to provide a more detailed explanation of the claim history to the underwriting department and ask them to reconsider the decision.

3. If a company denies you a policy because your CLUE report includes a claim inquiry that was unpaid, report the company to the Department of Insurance; this is a violation of California law.

4. Do not be afraid to file legitimate claims with your homeowners’ insurance company. For more information on how to file a claim and what practices are considered unfair claims settlement practices under the law, see the California Department of Insurance website at:

5. If you feel that you have been unfairly treated by your company after filing a claim or making an inquiry about what your policy covers ‘ whether by being cancelled, nonrenewed, or charged higher rates, file a complaint with the California Department of Insurance and send a copy to your state Senator and Assemblyperson and FTCR (

For more information regarding purchasing homeowners insurance, including consumer complaint surveys and premium comparisons, see the California Department of Insurance website at

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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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