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Brokers welcome and insurers review the CCIR’s discussion paper on credit scoring


June 17, 2011   by Canadian Underwriter


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Ontario’s broker association is encouraging the province’s consumers to provide input to the Canadian Council of Insurance Regulators (CCIR) on the use of credit scoring in insurance.
The Insurance Brokers Association of Ontario (IBAO) was responding to the release of a discussion paper on the topic by the CCIR on June 17.
“Regulators should be commended for the release of this issues paper because it acknowledges the risks to consumers that the IBAO has been raising with government and consumers,” said IBAO CEO Randy Carroll. “All consumers should provide input on this stakeholder process and should consult our Web site, www.SoaringInsuranceRates.ca, to learn more about making their voices heard.”
The CCIR’s paper identifies seven potential risks to consumers related to the use of credit scoring by insurers. The CCIR is asking for stakeholder input on whether these risks in fact represent a harm to consumers and whether or not current law already addresses these risks.
The Insurance Bureau of Canada, representing Canada home, auto and business insurers, said it is reviewing the report and intends to make a submission of its own as part of the consultation process.
Bryan Yetman, IBAO board chairman, observed in an email that three issues identified and discussed in the CCIR paper – consent, disclosure and privacy – played a role in a recent decision by the B.C. privacy commissioner. In that case, the privacy commissioner found an insurer had not disclosed clearly enough to a consumer that it was using the customer’s credit score for the purpose of underwriting.
The CCIR paper does note there seems to be a “discrepancy between what insurers and consumers are reporting” when it comes to obtaining a consumer’s consent to use a credit score for underwriting purposes.
Such a disconnect “suggests to the CCIR that the consent given is not sufficiently informed,” the CCIR says in its paper.
IBC does not have an official position on the use of credit scoring. It points to a voluntary code it has published for insurers that do use credit scoring.
“Some of our member companies use it as an underwriting tool, others do not,” the IBC said in its statement. “In general, we support the right of our member companies to use a variety of tools for underwriting purposes.
“For property and casualty insurance companies that use credit information, IBC has introduced a voluntary Code of Conduct that enhances the protection of privacy and other consumer rights.”
IBC’s voluntary code calls on an insurer to gather prior consent, whether verbal or in writing, to collect and use credit information.
The code says the consent must be informed; it cannot be given on behalf of someone else; the insurer must retain proof of the consent; and the consent is assumed to be valid for the duration that the policy is in effect.