Ontario brokers have renewed their call for a ban on credit scoring in homeowner lines after the federal privacy commissioner found in December that an insurance company had not properly obtained consent to use a customer’s credit score for the purpose of underwriting their insurance.
The Office of the Privacy Commissioner of Canada further found that the company was not transparent about the process, noting that the customers making the complaint had been with the company for six years and did not know the company used their credit score as a factor in determining their premiums.
However, the privacy commissioner also found that insurers did have a legitimate purpose in collecting the information.
“We find it difficult to conclude that a reasonable person would not consider it appropriate that the company would collect and use statistical scores as a tool to underwrite insurance policies and set premiums for its customers in Ontario, especially given that the provincial government has specifically allowed it,” the commissioner wrote in its finding regarding the unnamed insurer.
Citing the federal privacy commissioner’s “concern” about credit scoring, the Insurance Brokers Association of Ontario (IBAO) renewed its call for Ontario legislators to ban it in both home and auto insurance lines (currently it is banned only in auto lines).
"We are extremely pleased with this significant finding, as it supports what we have been saying for years," said IBAO CEO Randy Carroll. “Consumers are not being protected under the current regulations, and we need the Ontario Government to take action to ban the use of credit scoring in insurance.”
The privacy commissioner found that insurance company did attempt to obtain consent to use the customers’ credit score for the purpose of calculating premium. But the language on the insurance company’s application form, which is based on a standard industry form, was too broad, the privacy commissioner found.
“An applicant reading that provision would not easily be able to infer that their credit agency credit score will be used to determine their policy premiums on an ongoing basis,” the commissioner said.
In addition, the privacy commissioner said the language in the form used to obtain consent – containing the words “may use the score” – is misleading, since it implies that the company may not always use the score to calculate premium. In fact, the commissioner’s finding said, “the company advised our Office that it obtains a statistical score at the first renewal of all policyholders in Ontario.”
