August 14, 2009 by Canadian Underwriter
Transparency around the use of credit scoring has placed the role of the broker front and centre in the insurance transaction between insurers and policyholders, the self-regulating body of Ontario’s brokers observes in a quarterly newsletter.
“It is often brokers that are caught in between insurers underwriting risks and the right of consumers for a transparent process,” John Baizana, president of the Registered Insurance Brokers of Ontario (RIBO) writes in RIBO’s summer newsletter. “For example, collecting personal information from a consumer without first explaining to them why that information is required and obtaining their meaningful consent.”
Earlier this year, Ontario’s insurance industry regulator, the Financial Services Commission of Ontario (FSCO) issued bulletins relating to automobile insurance quoting and underwriting practices. They discussed in detail existing restrictions on the use of credit scoring in underwriting and risk classification for automobile insurance.
The Insurance Brokers Association of Ontario (IBAO) has asked FSCO to ban the use of credit scoring in homeowner lines as well.
The lack of transparency around the use of credit scoring has placed brokers in a bind, RIBO says, because the broker’s first priority should be their clients.
“Requiring or encouraging consumers to submit to credit checks without clearly telling them why that information is required and how it will be used and/or cancelling or not renewing coverage without being able to explain why does not reflect client priority.
“When brokers find themselves in situations such as these, they have every right to ask insurers for relevant answers. Without this information, it is difficult to see just how we can fulfill our duty to place the client’s interest first.”