May 27, 2009 by Canadian Underwriter
Some Ontario insurers are trying to elude the province’s ban on using credit scores in auto insurance by applying credit ratings to property insurance, since credit scoring is allowed on personal property (home) insurance, according to the Insurance Brokers Association of Ontario (IBAO).
The IBAO raised its concerns at a May 26 press conference at the Queen’s Park provincial legislative building in Toronto, where brokers met with finance ministry officials to discuss the issue.
The province’s insurance regulator, the Financial Services Commission of Ontario (FSCO), issued a bulletin in February 2009 giving insurers 60 days to bring their practices in line with the province’s ban on using credit for the purposes of rating and quoting in auto insurance lines.
Those 60 days are now up, and “unfortunately some insurers continue to refuse quotes where consent to access credit reports is refused, and continue to segment renewals within subsidiary companies,” IBAO board chair Rodney Hancock observed in his prepared remarks to the media.
In fact, some companies are starting to use credit scoring in personal property insurance, which potentially has an effect in auto insurance further down the line, Hancock said.
“Some insurers are threatening to increase premiums or cancel home insurance if consumers do not provide consent to access credit reports,” he said. “Should the latter occur and consumers’ home insurance [be] cancelled, the corresponding auto premiums automatically increase since these consumers would no longer qualify for a multi-policy discount.”
In light of this type of situation, the IBAO is asking MPPs to issue a total prohibition on the use of credit scoring in both home and auto lines.
Asked why a ban on credit use on the homeowners’ side might work given though the ban on the auto side is perceived to be ineffective, IBAO CEO Randy Carroll noted that FSCO has asked for additional powers to regulate the use of credit according to Ontario Regulation 7/00 (Unfair or Deceptive Acts or Practices).
“They’re caught with a loophole right now where they actually can’t come back and enforce,” said Carroll. “On the quoting side, some insurers have challenged the regulator that they don’t have any ability to enforce or regulate quoting practices. [Insurers are saying] it’s the availability and processing of the insurance policy that [FSCO is] actually there to regulate.”
Therefore, the best way to protect the interests of consumers is to ensure that FSCO be granted the same additional powers to enforce the ban on credit in both home and auto lines, Hancock said.
“That means expanding current regulations in the Insurance Act that protect consumers from unfair or deceptive practices to include the use of credit.”