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Privacy Commissioner reignites credit scoring debate

New finding states insurers should obtain meaningful consent to collect credit information

In December, the Office of the Privacy Commissioner of Canada  (OPC) released a finding on the use of credit information by insurance companies.

The OPC finding related to two complainants who saw their home insurance increase significantly from one year to the next. The complainants alleged that “their insurer’s policy of basing premiums on a customer’s credit information, obtained from a credit bureau, was not justified,” according to the OPC report.

Read: PEI draft regulations could ban credit scoring

“Our Office has some general concerns with information – provided to credit reporting agencies for one particular purpose – being collected and possibly being used in a different context,” states the report.

In it’s findings, the OPC found that, in this instance, “meaningful consent had not been obtained to collect the complainant’s personal information.”

The OPC recommended that the insurance company adjust its clause to include consent for its collection of credit information and that existing policyholders be informed of the practice.

Read: Credit scoring catch-up

“We also recommended the company ensure it makes information about its policies and practices on the use of this information readily available to individuals who wish to acquire it.”

“We are extremely pleased with this significant finding, as it supports what we have been saying for years,” stated Randy Carroll, CEO of IBAO, in a press release.  “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.”

In 2011, a ‘voluntary code of conduct’ was implemented by the Insurance Bureau of Canada (IBC) that states consumers must be informed when credit information is being used and must consent.  However, the findingPr released by the OPC found that “the company does not appear to be following the guidance provided by its own industry association with respect to consent.”

“The industry is proving over and over they can’t be trusted to follow their own code,” continued Carroll. “This is one example of an insurance company using credit scoring without meaningful consent, but in truth, this is an industry wide issue and action must be taken to protect consumers.”

The insurer involved in the complaint ultimately committed to changing its application form and informing policyholders at their next renewal about its use of credit information.

The report also states that, “the long-term public policy impact stemming from the use of credit information for the purposes of assessing insurance risk is unknown at this time. Accordingly, our Office will continue to conduct research and monitor this trend and our position may evolve over time.”

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