The Insurance Brokers Association of Ontario (IBAO) and member brokers are calling for a complete ban on the use of credit information when rating or underwriting insurance rates.
Current auto insurance regulations prohibit insurers from using certain financial and other \u2018lifestyle\u2019 information when underwriting policies but do not prohibit insurers from asking questions about financial information which, when asked, can put consumers at a disadvantage. There are no rules against the use of credit for other personal lines P&C insurance products.
\u201cThe use of credit is not in the best interests of consumers and is unacceptable,\u201d says Rodney Hancock, IBAO chairma. \u201cThe only way to protect the interests of consumers is to have a complete ban and that means expanding current regulations in the Insurance Act that protect consumers from unfair or deceptive practices to include the use of credit.\u201d
Ontario\u2019s independent insurance brokers have long championed a full prohibition on use of credit information and were pleased to see the Financial Services Commission of Ontario (FSCO) issue a bulletin this past February that warned insurers about the rules regarding its use. But increasingly the association is hearing from consumers whose efforts to obtain insurance coverage or an insurance quote has been delayed or hindered because of their credit history or their refusal to grant access to the information.
\u201cWe\u2019re seeing more and more occasions where insurers are using credit scores behind the scenes to segment prospective customers,\u201d says Hancock. \u201cThe misuse of credit scores excludes eligible drivers and home owners from finding the most economical insurance coverage. In many cases, the people that suffer the most, newcomers, single families, the unemployed, and entrepreneurs who have taken out significant loans to start or grown existing businesses are the ones who cannot afford to be punished.\u201d
FSCO is currently conducting a five-year review of the rules and regulation that govern auto insurance in the province. Ontario\u2019s brokers support the recommendation for the prohibition of the use of credit information when determining auto insurance rates, but are urging the Ontario government to implement a full ban for all personal lines P&C insurance products.
\u201cIn order to put the interests of Ontario\u2019s insurance consumers first, a ban on using credit ratings should, in addition to auto insurance, include personal line property and causality insurance products.\u201d adds Hancock. \u201cWe must protect consumers for all their insurance needs, not just auto insurance.\u201d
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