The Canadian Council of Insurance Regulators (CCIR) group tasked with reviewing the use of credit scoring by insurers has been unable to come up with recommendations on the matter, in perhaps a disappointing end to a long look at the issue.
In its November 2012 findings report, the Credit Scoring Working Group noted it had a “preponderance of opinion but a dearth of fact as to the actual and current, rather than potential, harms that may be accruing to consumers from the use of credit scores by insurers.”
Read more: Everyone in the insurance industry - including the broker sales force - has a role to play in educating consumers about the use of credit scoring: IBC
To reach a point where it could make recommendations, the group said market conduct reviews by various provincial regulators would be needed, and that’s beyond CCIR’s scope.
Because of that, the final word on the risks and harms associated with credit scoring (and what to do about it) now rests with policymakers, CCIR says.
The findings report is perhaps unsurprising. Last December, CCIR chairwoman Danielle Boulet said there would be no harmonized policy on the use of credit scores in underwriting.
"Ultimately, this is a government decision dependent upon a combination of political and socio-economic conditions within a jurisdiction, and a jurisdiction's level of tolerance in relation to any potential risk identified,” she said at that time.
Read more: Harmonized policy on the use of credit information in underwriting will not happen: CCIR
Brokers have generally been opposed to the use of credit scoring, because of inadequate consent and understanding among consumers about its use. Some insurers, on the other hand, have suggested that existing rules set out by the Insurance Bureau of Canada (IBC), mean further regulatory action isn’t required.
In June 2011, the group released an issues paper on the subject and sought response from the industry and consumer groups. In its current findings report, it noted that it had received a submissions from insurers, insurer organizations, brokerage organizations and credit bureaus.
Read more: Voluntary code on credit scoring not working: IBAO
No consumer groups, however, submitted a response to the issues paper, despite what the group said were its best efforts.
Results from consumer surveys completed by the Insurance Brokers Association of Ontario (IBAO) and Alberta’s Consumer Representative to the Automobile Rating Board (AIRB), were considered in its issues paper though, CCIR noted.
The Credit Scoring Working Group was created in 2009 to look at the issues and options around the use of credit scoring models in underwriting and other ways that insurers use data from credit rating agencies.