Consumer advocate Tom Johnson wants to know why an insurance company would use a customer's credit rating to help determine a home insurance premium. (CBC)

Newfoundland and Labrador's consumer advocate is questioning why an insurance company is checking its clients' credit histories, and whether the search will be used to justify higher premiums.

The Co-Operators Group has been contacting clients in recent weeks with a notification that it will use a "credit score" to calculate home-insurance premiums at the time of renewal. Clients are advised to contact the company if they don't want their score used, although a company circular cautions that "you may not receive the best premium possible."

The Co-operators told clients that "credit scores can be used as a tool to help predict the probability of having a claim."

Tom Johnson, who serves as consumer advocate on behalf of the Newfoundland and Labrador government, questions why a customer's credit risk needs to be checked at all in order to calculate a home-insurance premium.

"Somebody moves address and they didn't get a credit card bill in time, and by the time it gets to them, they've been put in collection and that has an impact on their credit score," Johnson told CBC News.

"Does that really make them more risky?"

Co-operators Group told CBC News that its research shows that people who manage their personal finances responsibly tend to be responsible about other things, as well, including looking after their homes.

A company official said that Co-operators is not the first insurance company to adopt the method, and that many homeowners may not be aware of it because their insurers never informed them.

Bill Adams, the Atlantic Canadian representative of the Insurance Bureau of Canada, said consumers who do not like the Co-operators Group's approach have a choice.

"They're the ones who can determine whether or not they want to pursue an agreement with an insurance company or not, based on this or a number of other variables," he said.

"It's a competitive marketplace and ultimately they should take their business where they are comfortable placing it."

Johnson, meanwhile, also questions why customers who object to having their credit ratings checked may then automatically face a penalty.