Credit score and insurance

The Insurance Bureau of Canada sets credit score guidelines

The Insurance Bureau of Canada (IBC) has released a code that gives guidelines for the insurance companies that use credit scores in their underwriting, rating and quoting personal auto or home insurance. This code addresses the issues that surround credit scores. These are privacy, accuracy and regulatory issues. The insurers have been urged to use the information fairly.

These recommendations are voluntary. The IBC is stressing that the insurers cannot use the credit score as the sole variable when they decide to cancel a policy or refuse insurance. Nor can it be the only factor when refusing a renewal or even refusing to quote. The other area is that they cannot deny coverage to someone who does not have a credit score. They cannot refuse to quote someone who says "no" to having credit scores factored into the pricing or acceptability.

The IBC stresses that the insurers have to make sure the information used is correct and suggests that insurers do an updae on credit information at least every three years.

The importance of a change in a credit report is noted. The code states, "when informed by a consumer reporting agency of a correction, supplement or deletion to an individual's credit file, the insurance must immediately make the necessary adjustments to the file and and shall re-underwrite and re-rate the consumer within a reasonable period of receiving notice." The question here is, what is a reasonable period?

Another requirement recommended by the IBC is that the insurers must have asked for the consumer's consent to use credit scores. They cannot make an assumption that since there has not been a declaration of "no" that the consent has been given by the consumer.

Who gets to see this information? The IBC recommends that only the people who need to see it to complete the process. In other words, if it is not your job to underwrite then you should not have access. Be aware that the code is a voluntary guideline. It does not have to be adhered to by the insurance companies.

There is a section of the code that recommends a neutral score for someone who has just gone through identity theft, a death or a serious illness. The resulting negative affect on the credit score should not be considered as a strike against that consumer.