Insurance register under fire: Vivien Goldsmith reports on a dispute with the Data Protection Registrar

THE DISPUTE between the insurance companies and the Data Protection Registrar over the setting up of a database of past claims may be near settlement.

The registrar, Eric Howe, was unhappy that insurance companies planned to log claims made over the past three years in the Clue (comprehensive loss underwriting exchange) database although customers had not been asked for permission.

Insurance application forms for contents and building policies and motor insurance are now being altered to tell applicants that the information will be logged on a computer.

The insurers wanted to be able to search the database when they received applications to check that the information on the forms gave the full picture - for instance about past claims.

The registrar may be willing to allow the old information to be used to combat fraud by checking claims. But he does not want the information to be used to help insurance companies judge applications at the outset by checking past claims.

In his annual report, published this week, Mr Howe said he did not want past data loaded on to the computer.

'My current view is that this would lead to a breach of the duty of confidence which insurers owe to claimants and should only be done with a claimant's express consent,' he said.

The companies now seem to be willing to use the data for anti-fraud claims checking only. They plan to use the information more widely at a later date. This may be enough to satisfy the registrar, but the matter has not been finally resolved.

The Insurance Ombudsman, Julian Farrand, who was not involved in the discussions, said that all checking ought to be done at the outset. Otherwise people would be paying premiums believing they had a valid policy, yet when a claim arose the the policy could be deemed invalid, perhaps because a past claim was not disclosed.

Clue was set up last November by a committee of insurance companies including Guardian, General Accident and Commercial Union.

The Association of British Insurers has been running a campaign against fraudulent claims. Its public affairs manager, Tony Baker, said being able to check a potential customer's past history would open the way to offering no- claims discounts.

At the moment individual insurers can be sure only that no claim has been made against them.

General Accident offers no- claims discounts of up to 25 per cent on household insurance, but past years with other insurers do not count. It may be preparing to offer more widely based discounts when the system starts operating fully. General Accident estimates that fraud costs it pounds 28m a year.

Insurance companies already store their own data, but Clue allows pooling of claims history along the lines that credit information is shared by those granting credit.

The insurers had been threatening to go ahead and use back data in the face of the registrar's opposition and rely on a long period before the case was resolved. By then they would have amassed enough data obtained with applicants' permission to make the databank viable.

The companies plan to start using information on contents and buildings insurance in the autumn. Motor claims data will start being used in the spring.

Data on claims relating to redundancy, accident and sickness, travel and commercial business are under consideration for a later date.

'The only people who would disagree with Clue would be those telling lies,' Mr Baker said.

'Would you rather have a register or pay 10 per cent more for insurance? We have done opinion research which shows that people would rather we used a register.'