Personal Privacy in an Information Society. Property and Liability Insurers


In contrast to most life insurers, a property and liability insurance company has a ready market among people concerned about the replacement cost of tangible assets or about protecting themselves against liability claims brought by others. A property and liability company, moreover, can increase the price charged a policyholder or effectively cancel the risk by declining to renew coverage at the expiration of each contract period, Yet, as in the case of life and health insurance, detailed information s needed to decide whether to accept the risk in the first instance and how much to charge.

With property insurance, the items to be insured need to be identified accurately and valued, and the degree of care taken to protect them against fire, theft, or loss established. Since these coverages are also susceptible to abuse and fraud, the company wants to know enough about an applicant to make a reasonably confident estimate of his probable loss characteristics. Because liability insurance protects a policyholder against legal damages he may incur through negligence, underwriters consider it important to know, in the case of homeowners coverage, whether his home is well maintained and reasonably free of hazards, or to know, in the case of automobile insurance, whether he and others regularly using the car are responsible drivers. Although the applicant and agent are again primary sources of such information, a company often checks the information they provide through an inspection bureau report or other sources considered more impartial.

The types of information needed to underwrite automobile insurance include name, address, date of birth, marital status, sex, occupation, driver's license number, use of vehicle, any physical impairments, how long licensed (if less than three years), and information regarding any accident or moving traffic violations in the past three years. State motor vehicle department records are often checked to verify the driving record of the applicant and members of his family. Some companies also require a physician's statement for elderly or physically impaired drivers. Finally, automobile underwriters sometimes order an investigative report on an applicant to find out whether his character, mode of living, and reputation in the community, may, in the judgment of the underwriter, influence the frequency of claims or the applicant's "defendability" in court. In other words, these reports are used by an auto insurer to determine whether the premium at which a policy may be issued is the correct one, but also, if highly derogatory information s uncovered, whether the policy should be issued, or if it has already been issued, whether it should be renewed.

For underwriting other forms of personal property and liability insurance, such as homeowners' policies, personal property floaters, fire policies, and boat policies, information requirements vary widely. To prepare and issue homeowners and fire policies, for example, the information required would include type of construction, age of dwelling, and distance to the nearest fire hydrant and fire department. For certain properties, an appraisal of their value may be required.

Information is, of course, also sought in the settlement of property and liability claims. Usually, this involves no other contact beyond the insured, the police or fire authorities, and the repair concerns involved in placing the property back in its original condition. Where the policy covers bodily injuries, however, contact may be made with the attending physician, the hospital, or other providers of medical services regarding the nature and extent of the injuries and the reasonableness of fees charged for services. In those few situations involving suspected fraud, the investigative activity may involve more extensive interviewing which can include witnesses, discussions with local law enforcement officials, and securing other background information that may be necessary to prepare for an effective defense if the claim is denied.

The investigation of claims or losses to determine the policyholder's liability to others (i.e., "third-party claims") will generally result in greater information gathering. A very detailed and complete investigation will frequently be made to determine the insured's responsibility for injury or damage and the degree or extent of such injury or damage. The role of inspection bureaus and private investigative agencies in the settlement of property and liability claims is briefly described in Chapter 8.