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Code of Conduct for Insurers’ Use of Credit Information

Q & As - Insurers’ Use of Credit Information for Rating and Underwriting

Credit Information

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:

  • Requires insurers to obtain a customer’s informed and express consent prior to collecting their credit information;
  • Stipulates that an insurer must not deny or cancel an insurance policy solely on the basis of a customer’s refusal of consent to allow an insurer to access their credit information;
  • Provides guidance for situations where customers believe that their credit information has been adversely impacted by extraordinary life events;
  • Requires that, in cases where a consumer has not acquired a credit history, insurers base their rating and underwriting decisions on other relevant information that is available to them.

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.

More Information

You can read up on the Code of Conduct for Insurers’ Use of Credit Information here.

Visit our Q&A page for answers to some common questions about the use of credit information. If you have further questions, contact one of IBC’s regional consumer information centres.

1Some Canadian provinces do not permit the use of credit information in the underwriting of automobile and property insurance policies.
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