November 16, 2009 by Canadian Underwriter
Forty-two per cent of Canadian property and casualty companies that use credit-based insurance (CBI) scores — representing 17% of market share — do not disclose an adverse affect of the CBI scores to policy applicants or policyholders, according to a survey done for the Canadian Council of Insurance Regulators (CCIR).
In addition, 68.4% of the 19 companies that used CBI scores indicated they do not disclose on their declaration pages whether a credit-based insurance score positively or negatively affects an applicant or policyholder’s premium.
All of the insurers in the CCIR study, with the exception of four (representing 7% of the market share), do disclose some of their surcharges and discounts on their declaration pages, but a majority of insurers in the study — 15 insurers representing 48% of market share — do not disclose any of the surcharges or discounts related to credit-based insurance scores.
The Financial Services Commission of Ontario (FSCO) undertook the survey on behalf of the CCIR in April 2009. The full results of the survey are available on the CCIR Web site at: http://www.ccir-ccrra.org/CCIR/index.htm
Designed to help “achieve a CCIR perspective” on insurers’ use of credit scoring, the survey canvassed the use of credit-scoring among insurers representing 75% of the property insurance market in Ontario (based on the 2007 total for direct written premiums (DWP).
The questionnaire contained 42 questions about credit-based insurance scoring. Results were categorized into six different categories. Results noted above fell into the ‘Disclosure and Consent’ category of the survey.
Other questions were grouped into the following categories:
• General comments from insurers (58% of respondents, representing 55% of market share, said they had found a direct correlation between CBI scores and loss experience based on its own insurance portfolios).
• Insurers that do not use CBI scores (44.1% of the survey’s 34 respondents, representing about 16% market share, said they did not use CBI scores).
• Insurers that do use CBI scores (including topics such as how CBI scores are used in the qualification process, rating process, underwriting process, disclosure and consent and controls).
• Use of CBI in other lines of business (including commercial lines, where 47.1% of insurers, representing 50% of the market, said they used CBI cores in commercial lines).
• Use of CBI Scores in other jurisdictions.