Use of credit scoring not an advantage for direct channel: Charles Brindamour

Direct writers obtain no benefit from using credit scores when pricing or underwriting, Charles Brindamour, president and CEO of Intact Insurance, told delegates at the Insurance Brokers Association of Ontario (IBAO)’s 89th annual convention in Toronto.
Speaking as a member of the CEO panel, Brindamour was asked if the use of credit scoring for pricing favours one distribution model over another.
He responded that if it were to be used, it would be to the broker model’s advantage.
“The direct models don’t really allow for the use of credit when it comes to pricing,” he said. “It doesn’t present an advantage for this channel in Ontario auto.”
Robin Spencer, president and CEO of Aviva Canada, argued that banning credit scoring would disadvantage the broker channel — and insurers supporting brokers — because a ban on credit would take away a valuable underwriting tool that insurers and brokers can use to win back business from direct writers.
Brindamour’s remarks created some confusion, prompting IBAO CEO Randy Carroll to ask Brindamour to clarify whether the direct writers he monitored were using credit scoring.
Brindamour confirmed the direct companies he monitored were not using credit scoring for the purpose of underwriting.
“Then we don’t need it,” Carroll said of credit scoring, which the IBAO wants prohibited in all lines of business.
But Jean Francois Blais, president and CEO of Axa Canada, said as long as banks have access to consumers’ credit information, insurers — and thus the brokers who distribute their products — need to use the information to remain competitive and maintain a level playing field.
“Is it the proper solution to ban [the use of credit scoring] when the competition has it?” Blais asked the panel. “The reality as we see it is: if we ban it, don’t think it will go away. We are here to compete.”
Kevin McNeil, president and CEO of Gore Mutual Insurance Company, told the panel enough underwriting factors are available for insurers to write profitable books of business.
“When you couple the underwriting factors with predictive modelling, and the conversations that occur between the customer service representative and our underwriters, we don’t need credit in order to profitably underwrite and be successful as an insurer,” McNeil said.
George Cooke, president and CEO of The Dominion (which does not use credit scoring), said he felt the debate around credit scoring was caused by regulations that are “unclear and unenforced.”