Use of Credit Information
As a consumer, you know that paying bills on time is an important aspect of managing your credit rating. You also know that your credit information can have a significant influence on some important activities in your daily life such as renting a car, leasing an apartment and acquiring a credit card.
Insurance companies that choose to use credit information for insurance combine it with a number of other factors to determine what the appropriate premium should be for assuming particular risks. By evaluating many factors together, including credit information, insurance companies are able to determine a fair price for each policy.
Do all insurers use credit information?
Where the use of credit information for insurance rating and/or underwriting is permitted by law1, some insurance companies do and some do not use credit information. IBC has not taken a position for or against the practice, just as it does not hold a position on a wide variety of the practices insurance companies use to manage risk and compete in the marketplace.
At the same time, IBC believes firmly that insurers that use credit information should do so transparently and, in a manner that protects the interests of their customers. This is why IBC has introduced a code of conduct that will help protect your privacy and other consumer rights. Although voluntary, the code has been adopted by 85% of personal lines insurers in Canada.
Code of Conduct for Insurers’ Use of Credit Information (the “Code”)
On December 14th, 2010, following extensive consultation with insurers and insurance regulators, IBC’s Board of Directors approved the Code of Conduct for Insurers’ Use of Credit Information. For insurers that choose to use consumer credit information, the Code provides uniform standards that enhance consumer protection. For example, the Code:
The Code is widely supported and endorsed by personal lines insurance companies. If you would like to know whether your insurer adheres to the Code, please contact your insurer directly or visit the company’s website for further information.
You can read up on the Code of Conduct for Insurers’ Use of Credit Information here.