Insurance Commissioner Jim Poolman clashed with insurance executives about whether they should be barred from using some information in deciding whether to sell a policy to a customer.

"We shouldn't be defying common sense when it comes to how consumers are treated in North Dakota," Poolman said Monday at a Senate Industry, Business and Labor Committee hearing.

Poolman is advocating a bill, which has been in the works for more than a year, that would bar companies from using incidents when a customer makes a claim - but never collects any insurance money - in deciding whether to raise the customer's rates or drop coverage altogether.

Poolman also is concerned that customer questions posed to insurance agencies, to ask about a policy deductible or the extent of coverage, are being used in deciding whether to sell a policy, and how much the customer should pay.

Insurance executives and lobbyists who turned up at Monday's hearing on the legislation said some of Poolman's statements were baffling, and others were arguable.

Robert Hovland, president of Center Mutual Insurance Co. of Rugby, and Dale Haake, a claims director for Nodak Mutual Insurance Co. of Fargo, said they knew of no companies that kept track of customer questions and used the information to make rate decisions.

"I cannot, for the life of me, see why anyone would want to punish a customer for making an inquiry on what their policy does or does not do," Haake said. "The people who do not actually turn in the claim … for gosh sakes, these are the people we want to keep."

The argument about claims that are made, but not paid, is more complex. Poolman uses this example: A homeowner calls an insurance adjuster to check his roof after a hailstorm. The adjuster estimates that repairing the damage will cost $1,300. The homeowner's policy says he must pay the first $1,000, so he pays the entire amount, to avoid a relatively small claim that could result in a rate increase later.

That claim could be used later in decisions about whether to raise the homeowner's rates or discontinue coverage, even though the person never was paid, Poolman said.

The state Association of Realtors, which is supporting Poolman's bill, backs his argument.

"We, and our clients, feel it is not fair to increase insurance rates based on a loss history when no claim was ever filed, or paid, by the insurance company," said Lavata Becker, a Bismarck real estate broker.

Realtors also like a provision that prevents insurers from using claims filed by the previous homeowner against a new home buyer, said Vicki Roller, a Bismarck Realtor. In some instances, a home buyer has had insurance coverage abruptly canceled because of the previous owner's claims record, Roller said.

Insurance representatives say instances of unpaid claims are not always so simple. Investigating a claim is expensive, and the background information gathered is relevant, even if the customer does not get a payment, Haake said.

"To ignore these costs is unreasonable," he said. "It is part of achieving a clear picture of the loss history of an account."

Pat Ward, a Bismarck attorney and insurance company lobbyist, called the legislation "awful" and said a better measure is being drafted by the National Conference of Insurance Legislators, a group of state lawmakers who are interested in insurance regulation.

"We're really treading into new waters here," Ward said. "My recommendation would be, let's tread carefully … Why invent the wheel, if somebody else is in the process of doing it for us?"

The bill is SB2186.