Credit Scoring Requires Consent

In the October 2008 edition of Canadian Underwriter, Craig Harris wrote an article entitled “Risk it all on Credit” that included references to what is permissible in Alberta with respect to the use of an insurance applicant’s credit score.

The purpose of this letter is to correct information within the article with respect to an insurance company’s collection and use of a person’s credit score when purchasing insurance in Alberta.

The collection and use of personal information is governed by provincial and federal privacy legislation. My understanding is that this privacy legislation requires consent for any person to collect and use another person’s credit report or score.

Currently, Alberta does not have a specific insurance regulation regarding the use of a person’s credit score in the purchase of insurance. However, with respect to automobile insurance, the “consent” on the approved automobile insurance application form was amended in 2006. The following sentence is now included in the “consent” provision. “If I apply for a premium payment plan, I authorize you to obtain and use my credit report.”

As a result, without specific authorization outside of the insurance application process, automobile insurers are not authorized to collect or use an applicant’s credit report regardless of whether the application is for compulsory or optional automobile insurance coverages.

Recently, instances have come to my attention where insurance companies have refused to provide a premium quote for property insurance unless the person requesting the quote agrees to allow the insurance company access to the person’s credit report or score. In my opinion, a person’s credit report or score has nothing to do with a quotation of a premium or insurance coverage. I consider this type of pre-condition to fall within s. 509(1)(c) of Alberta’s Insurance Act. This subsection says no insurance company or insurance agent may engage in an unfair, coercive or deceptive act or practice.

In the near future, I will be issuing a bulletin to all insurance companies licensed in Alberta advising them of our position regarding insurance companies insisting on a person’s authorization to obtain that person’s credit report or score prior to quoting on insurance coverage.