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Has your home insurance rate gone up? Wendy Mesley reveals it could be connected to your credit score.
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Erica Johnson asks: When you buy from Bloomex, do you get your money's worth?
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Has your home insurance rate gone up? It could be connected to your credit score.
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WHAT'S A CREDIT SCORE?
A credit score is a number ranging between 300 and 900. The lower your credit score, the higher your risk because you're not seen as being financially responsible. To find out your credit score, you can contact credit score providers such as TransUnion, Equifax, and Experian.
THE INSURANCE COMPANIES
THE CO-OPERATORS
The Co-operators is one of many insurance companies using credit scoring. The company says it has been transparent in notifying clients about the practice of using credit scores as a factor in determining people's rates.
Below are a few points taken from a "Guiding Principles" document sent to Marketplace by The Co-Operators about credit scores and home insurance:
"On the issue of credit scores and insurance, The Co-operators will be open and transparent
with all stakeholders – clients, staff, agents, member owners and the media. Just as we
have taken the time to study and understand credit score, we will help educate all interested
parties.
"Credit score is one of the most predictive indicators of future claims for property and
casualty insurance. As such, it is a logical rating factor for home insurance.
"In all situations where credit score will be used for rating, The Co-operators will obtain
consent from clients and prospects. If a client chooses not to provide consent to check their
credit score, we will honour their request; however, we may not be able to provide the most
competitive rate (or premium)."
Read The Co-Operators' Q & A to Marketplace on credit scoring
In a newsletter sent to the majority of their clients in 2009, The Co-Operators mention that they will start to use "credit score as a rating factor to determine home insurance premiums."
AVIVA
Below is Aviva's statement to Marketplace on credit scoring:
"Aviva Canada uses credit scoring as a tool to provide discounts on home insurance policies. It is one of a range of factors, including (but not limited to) location, age of home, security systems and proximity to a fire station, used in rating a homeowner insurance policy.
"Credit scores are a valid indicator of future losses that allow for more accurate pricing of an individual’s home insurance policy, thereby appropriately spreading risk among customers.
"At Aviva, we only use credit to determine eligibility for discounts and do not use it to decline coverage. In other words, it is used to bring an individual’s insurance premiums down, not up.
"Credit scoring is widely used by most major Canadian property and casualty insurers."
Read an article featuring an extensive interview with Aviva president and CEO Robin Spencer, which includes the company's position on credit scoring
PROVINCIAL BREAKDOWN OF CREDIT SCORE USE
Both Alberta and Ontario have banned the use of credit scoring and its use with automobile insurance. New Brunswick is banning its use outright, for any kind of insurance.
Randy Carroll, CEO of the Insurance Brokers Association of Ontario wrote this article arguing points against the use of credit scoring on home insurance rates.
Insurance Brokers Associations across Canada:
National Website
Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland
Nova Scotia
Ontario
Quebec
Saskatchewan
OTHER INSURANCE INDUSTRY STAKEHOLDERS
IBC
The Insurance Bureau of Canada is a national association which represents Canada's insurers. They say they do not have a position on credit scoring, since not all insurers use it. However, they do have a voluntary Code of Conduct.
Canadian Council of Insurance Regulators (CCIR)
The Canadian Council of Insurance Regulators published a study in August 2009 on credit scoring. Here, you will find information about the number of companies using the practice, how long they've been using for, how and whether they notify clients, method of collecting credit scores etc. While it does not breakdown names of specific companies, it will give you an understanding of the practice and its use within the insurance industry.
Canadian Association of Direct Response Insurers (CADRI)
Marketplace received an overview from an insurance industry association, the Canadian Association of Direct Response Insurers (CADRI). CADRI represents certain banks and insurance companies that sell directly to consumers. Based on studies, CADRI says there's evidence that credit score use is beneficial to consumers, "The majority ( on average about 60%) who have good credit scores will receive a reduction in their premium when credit score is added to the variables used to assess risk and set premiums." Read the full statement.
CBC does not endorse and is not responsible for the content of external sites. Links will open in new window.
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