Canadian Underwriter

Credit Scores “Unacceptable” Risk Tool: FSCO


February 12, 2009   by Terri Goveia


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Ontario’s financial services commission has weighed in on credit scores, warning auto insurers that using them as a risk tool conflicts with the Insurance Act.

Lifestyle factors—including credit history and credit rating—aren’t acceptable as underwriting or risk classification criteria for auto insurers, according to a Financial Services Commission of Ontario (FSCO) bulletin issued yesterday. “FSCO does not believe that there is any reason to require, collect or use credit information for purposes of providing a quote, nor is a full application required or justified for the purposes of providing a quote,” the bulletin states, warning that the commission will take action against insurers who don’t conform to its terms. FSCO plans to follow up with insurers on their procedures within the next two months.

The FSCO statement follows months of industry chatter on the topic—and a recent feature article in the Toronto Star. It urges insurers to review their practices, as well as provincial privacy and underwriting regulations. The bulletin acknowledges that insurers can request credit information once a consumer has received a quote and want to buy coverage, but notes that OAF1 (The Ontario Application for Automobile Insurance) conditions restrict its use: they can only use the information to determine whether the consumer has a prior cancellation for non-payment of premiums.

“Insurance companies are not to use criteria prohibited for rating or underwriting purposes (e.g., criteria related to a consumer’s social, personal and/or economic status) to decline to provide quotes, to hinder or delay a consumer’s efforts to obtain insurance coverage or an insurance quote, or as a basis for differential treatment … of consumers in the quoting, application or renewal process,” the bulletin—signed by FSCO CEO Bob Christie—states. It notes that the commission is considering changes to OAF1, which are expected later this year.

The Independent Brokers Association of Ontario (IBAO) has been a vocal critic of the credit scores in quoting. At press time, the IBAO had not responded to CI’s requests for comment.

This story was originally published by Canadian Insurance Top Broker.


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