B.C. privacy commissioner rules insurers must give consumers explicit notice that credit scores will be used for underwriting

B.C.’s Office of the Information and Privacy Commissioner has ruled that Economical Mutual Insurance Company must stop collecting and using credit scores until it provides customers with appropriate notification as required by the Personal Information Protection Act (PIPA).
The order notes The Economical did include the following disclosure statement in its 2003 CSIO insurance application form: “The applicants agree that reports containing personal, credit, factual record, premium payment or claims history information may be sought or exchanged in connection with this application for insurance or renewal, extension, variation or cancellation thereof.”
But this was not adequate notice of the purposes of collection of credit information within the meaning of PIPA, the B.C. Privacy Commissioner ruled in a May 6 order.
“The consent statement on the complainant’s application form did not expressly say that credit information might be obtained for the purpose of underwriting,” the order reads. “In order to satisfy the notice requirements in ss. 7(1) and 10(1)(a) of PIPA, individuals must be informed that their credit information may be collected for the purpose of assessing future risk of loss in underwriting the policy.
“Without this information, it is not reasonable to expect that a consumer would understand how Economical actually uses this information and therefore could not meaningfully consent to its collection for this purpose.”
The full order can be read at:
http://www.oipc.bc.ca/PIPAOrders/2011/OrderP11-02.pdf
In the matter before the privacy commissioner, a man complained The Economical had collected his credit score without his consent when the insurer renewed his homeowner’s insurance policy.
The order found it was reasonable for The Economical to collect the credit score for risk assessment, because a credit score is a valid predictor of future loss. It also stayed away from assessing the validity of using credit scoring for the purpose of underwriting insurance.
The order focused strictly on the nature of the complaint, which is that The Economical did not provide adequate notice that it would collect a credit score for the purpose of underwriting the homeowner’s policy.
The adjudicator ordered The Economical to review the consents it has been using on its insurance applications and to provide its customers with adequate notice of the purpose for collecting their credit scores.
“Consumers are generally unaware of the use of credit scoring in risk assessment in the insurance industry,” B.C. Information and Privacy Commissioner Elizabeth Denham said in a statement. “This order underscores the need for organizations to obtain informed consent from their customers for the collection of their personal information.”