Use of Credit-Based Insurance Scores: Privacy Commissioner Confirms Reasonable Purpose. Volume 6 Number 3 May 2013 CREDIT SCORING AND PRIVACY

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1 Volume 6 Number 3 May 2013 IN THIS ISSUE: CREDIT SCORING AND PRIVACY Use of Credit-Based Insurance Scores: Privacy Commissioner Confirms Reasonable Purpose John P. Beardwood and Arun S. Krishnamurti John P. Beardwood Partner, Fasken Martineau DuMoulin LLP Arun S. Krishnamurti Associate, Fasken Martineau DuMoulin LLP Use of Credit-Based Insurance Scores: Privacy Commissioner Confirms Reasonable Purpose A. Introduction Insurance is a form of risk management that is utilized by consumers to guard against the risk of loss. However, in order to insure that the pool of assets is sufficient to cover the losses of all consumers, insurance companies are required to properly assess and manage these risks. To do this, insurance providers utilize a variety of methods to determine the eligibility of the customer, decide how much coverage customers should receive, and determine the cost for such coverage by identifying the premium that properly relates to the insurance of the risk. While this process may be self-evident for most readers, it is a reminder of the importance to insurers of being able to identify and utilize factors with predictive value.

2 Volume 6 Number 3 CANADIAN INSURANCE REGULATION REPORTER Canadian Insurance Regulation Reporter The Canadian Insurance Regulation Reporter is published quarterly by LexisNexis Canada Inc., 123 Commerce Valley Drive East, Suite 700, Markham, Ont., L3T 7W8, and is available by subscription only. Web site: Design and compilation LexisNexis Canada Inc Unless otherwise stated, copyright in individual articles rests with the contributors. ISBN ISSN ISBN (print & PDF) ISBN ISSN X (PDF) Subscription rates: $ (print or PDF) $ (print & PDF) General Editor: Stuart Carruthers Stikeman Elliott LLP SCarruthers@stikeman.com LexisNexis Editor: Boris Roginsky LexisNexis Canada Inc. Tel.: (905) ext. 308 Fax: (905) cirr@lexisnexis.ca Advisory Board: Jeff Bear, Registered Insurance Brokers of Ontario Paul Belanger, Blake, Cassels & Graydon LLP J-P Bernier Randy Bundus, Insurance Bureau of Canada Anne Butler, Empire Life Robert McDowell, Fasken Martineau DuMoulin LLP Norma Nielson, Haskayne School of Business, University of Calgary Bernie Stevenson, Aviva Canada Inc. Grant Swanson, Financial Services Commission of Ontario Note: This Reporter solicits manuscripts for consideration by the Editor, who reserves the right to reject any manuscript or to publish it in revised form. The articles included in the Canadian Insurance Regulation Reporter reflect the views of the individual authors and do not necessarily reflect the views of the advisory board members. This Reporter is not intended to provide legal or other professional advice and readers should not act on the information contained in this Reporter without seeking specific independent advice on the particular matters with which they are concerned. One such method of calculating the premiums and assessing eligibility for a new policy or the renewal of a policy is through the use of an applicant s credit based insurance score. While, for the sake of simplicity, we use the term credit score throughout this article, we should note that credit-based insurance scores are not traditional credit scores in that they use slightly different considerations in calculating the final score: the credit-based insurance score is calculated using a mathematical model proprietary to the company doing the calculation. The use of credit based insurance scores in calculating insurance premiums and assessing risk has emerged as an issue in recent years. Critics argue that, among the plethora of factors that insurers consider in assessing risk and calculating eligibility and premiums, there is something conceptually different about including the credit score of an actual or potential insured in that menu of factors, which somehow makes it inappropriate or offensive. In some ways, it is odd that the use of this factor is only now becoming the subject of debate. The use of such scores by an insurer to assess risk or calculate premiums is not a new mechanism and has been particularly prevalent in the United States. In Canada, the use of credit information for insurance is inherent in a number of provincial laws on credit reports. For example, in Ontario, the use of creditbased insurance scores to determine insurance premiums, such as for property and casualty, is expressly permitted under the Consumer Reporting Act. 1 Similarly, the British Columbia Business Practices and Consumer Protection Act 2 allows a reporting agency to disclose credit information about an individual in a report to a person who, it has reason to believe, intends to use the report in connection with underwriting insurance involving the individual. 18

3 CANADIAN INSURANCE REGULATION REPORTER Volume 6 Number 3 As for the rest of Canada, with the exception of Newfoundland and Labrador and to a certain extent Alberta, Canadian legislation remains silent on the issue. 3 While other provinces, such as Prince Edward Island, have considered banning insurance companies from using credit information to set premiums or assess eligibility, no other such blanket bans have yet been implemented. 4 In other words, based on the current state, legislators appear to have already made the choice to allow insurers to use credit scores. Nevertheless, in a much noted recent finding, the federal regulator under the Personal Information Protection and Electronic Documents Act [PIPEDA] 5 had the opportunity to opine on whether it was reasonable for an insurer to use credit scores. Her findings on the issue are significant and worthy of review. B. Summary of PIPEDA Report of Findings # In December 2012, the Office of the Privacy Commissioner ( OPC ) of Canada reviewed a complaint involving the use of a credit based insurance score in calculating the premium to be charged to the complainants upon renewal of their policy (the Complaint ). In the Complaint, the complainants sought recourse from the OPC after they saw their home insurance premium increase significantly upon renewal of their policy. They alleged that the insurer s policy of basing premiums on credit information was not justified and that the insurer did not have the complainants knowledge and consent for the use of their information for this purpose. As outlined in the PIPEDA Report of Findings # (the Decision ), 6 the Commissioner evaluated the facts of the Complaint against the following specific requirements of PIPEDA: 1. Whether the use of credit-based insurance scores met the PIPEDA test of reasonableness in light of the requirement that an organization may collect, use or disclose personal information only for purposes that a reasonable person would consider appropriate in the circumstances Whether there was meaningful consent obtained from the complainants, and whether the companies were open about their policies and practices with respect to the management of personal information. 8 After assessing both of these issues, the Commissioner came to the following pertinent conclusions: 1. In brief, in considering whether the company s collection and use of credit information for the purpose of calculating risk was appropriate, the Commissioner noted the following: Section 8 of the Consumer Reporting Act (Ontario) expressly allows for the disclosure of credit information for the purpose of assessing insurance risk. The selling of insurance policies requires the undertaking of a risk analysis, and therefore, a reasonable person would consider it appropriate that the company would collect and use statistical scores as a tool. The Commissioner also concluded that the allegation that basing premiums on a customer s credit information obtained from a credit bureau was not justified was not well founded. 2. In considering whether meaningful consent was obtained, the Commissioner reviewed the language used in the consent provision of the complainant s original insurance application and concluded that it was overly general and 19

4 Volume 6 Number 3 CANADIAN INSURANCE REGULATION REPORTER would not have led an applicant to infer that a change in credit score would impact his or her premium. In response to the further assertion by the insurer that a two-page notice sent to policy holders at the time of their first policy renewal also adequately explained the collection and use of credit-related information, the OPC held both that (a) the notice was misleading, as while it stated that the company may use the score as one of the rating factors to determine premiums [emphasis added], the company actually obtained a statistical score at the first renewal of all policyholders in Ontario and (b) the notice did not establish consent for such use, as it was only sent to policyholders after they had already signed the policy application. As a result of the investigation, the insurer agreed to amend its application consent clause to provide existing policyholders with additional information about the collection of credit information and to post a written notification on its website about its use of credit information to assess customer risk. C. Analysis As we outline below, the Decision is worthy of closer examination for two reasons. First, while some commentators notably, the Insurance Brokers Association of Ontario (the IBAO ) discussed later have suggested that the Decision should be read as damning critique of the use of credit information, we would suggest that such reading of the Decision is grossly misleading. Second, the Commissioner s conclusion that the consent obtained by the insurer was inadequate was problematic in a number of respects. 1. Is the Use of Credit-Based Insurance Scores Reasonable? (a) The Studies Perhaps the most significant factor in determining whether the use of credit-based insurance scores is reasonable is whether there is a causal relationship between the credit-based insurance scores and risk. However, we would argue that this issue is largely moot, given the number and significance of studies determining that, from an actuarial perspective, the relationship between credit scoring and insurance losses is in fact one of the strongest predictors of future insurance loss. We have highlighted below certain portions of the more relevant studies. (i) Canadian Council of Insurance Regulators Report (2009) In 2009, the Canadian Council of Insurance Regulators ( CCIR ) published a report that summarized the results of a survey of insurers representing 75 per cent of the property insurance market (based on the 2007 total for direct written premiums in Ontario) in order to better understand how credit scoring is being used in the insurance industry 9 (the CCIR Report ). The CCIR Report concluded that the majority of insurers (19 insurers representing 55% of market share) have performed actuarial analysis on their own portfolios and satisfied themselves that there is a correlation between [credit-based insurance] scores and loss experience and that 94% of respondents felt [credit-based insurance] scores were a valid predictor of future loss experience. 10 Somewhat disappointingly, after reviewing the CCIR Report, the OPC s conclusion was simply that not all insurance companies in Canada were using credit scores for the purposes of risk assessment

5 CANADIAN INSURANCE REGULATION REPORTER Volume 6 Number 3 (ii) Federal Trade Commission Report (2007) For those who would fairly point out that the CCIR Report suffered from an inherent self-selection bias, we note that in 2007, the U.S. Federal Trade Commission ( FTC ) submitted a report to the U.S. Congress that reviewed the impact the use of creditbased insurance scores in the context of automobile insurance had on consumers (the FTC Report ). While this particular report was specific to automobile insurance, it is helpful as it was an expansive study conducted in a large insurance market. The FTC concluded that credit-based insurance scores are effective predictors of risk under automobile policies. More specifically, they are predictive of both the number of claims consumers file and the total cost of those claims. Therefore, the use of scores is likely to make the price of insurance more accurately match the risk of loss posed by the consumer. Thus, on average, higher-risk consumers will pay higher premiums and lowerrisk consumers will pay lower premiums. 12 In addition, the FTC found that the use of such scores may ultimately benefit customers as they permit insurance companies to evaluate risk with greater accuracy, which may make them more willing to offer insurance to higher-risk consumers. 13 In short, the FTC concluded that the use of creditbased insurance scores benefits consumers in two ways: lower risk consumers pay lower premiums, and high risk consumers are better able to obtain insurance, since insurers are able to more accurately price that risk into their premiums. (iii) Michigan Commissioner of the Office of Financial and Insurance Services Report (2003) While the FTC Report only reviewed the use of credit-based insurance scores for automobile insurance, it followed on the conclusions of an earlier 2003 report prepared by the Michigan Commissioner of the Office of Financial and Insurance Services. This latter report considered the use of insurance credit scoring in both automobile and homeowners insurance (the Michigan Report ). The Michigan Report also concluded that There exists a correlation between a person s insurance credit score and the likelihood that a claim will be filed. 14 The Michigan Report further found that the use of credit-based insurance scores ultimately reduces the likelihood of an insurer experiencing losses from those policyholders who are most likely to experience losses and make claims. As the later FTC Report noted, this was due to the fact that insurers are better able to identify those policyholders and charge them premiums commensurate with the losses they generate. 15 This report went on to state that the use of such credit-based insurance scores may have a subjective effect on the policyholders themselves, because if responsible behavior in general leads to the predictive link between credit histories and insurance losses, as insureds change behavior to obtain better insurance credit scores they may experience fewer losses. 16 (iv) American Academy of Actuaries Study (2002) The Michigan Report was preceded by a 2002 study conducted by the American Academy of Actuaries (to assist the U.S. National Association of Insurance Commissioners), which examined the use of credit history in the provision of insurance. Utilizing a detailed and quantitative approach and performing multivariate analysis, this study also concluded that credit history can be used effectively to differentiate between groups of policyholders and therefore is an effective tool 21

6 Volume 6 Number 3 CANADIAN INSURANCE REGULATION REPORTER such that different credit profiles predict different loss ratios, even when other factors (such as driving record, age of driver, and so forth) are held constant. 17 Note that at no point did this study make a normative judgement as to whether such credit-based insurance scores should be utilized but rather set out to make an objective determination as to whether the use of such scores had any measureable impact on the assessment of risk. (b) The Commissioner s Finding regarding Reasonableness In considering whether the company s collection and use of credit information for the purpose of calculating risk was appropriate, the OPC noted that s. 8 of the Consumer Reporting Act (Ontario) allows for the disclosure of credit information for the purpose of assessing insurance risk; 18 that the selling of insurance policies requires the undertaking of a risk analysis, and therefore, a reasonable person would consider it appropriate that the company would collect and use statistical scores as a tool; 19 the insurer s submission to the OPC, as per the conclusion of the FTC Report, that there is a benefit for both the insurer (who gains by managing its risk and pricing its insurance policies appropriately) and the policyholder (for whom credit information has a positive impact on the overall premium ) ; 20 the FTC Report and found that it affirmed the predictive value of credit-based insurance scores in claiming experience and that the use of such scores may result in consumer benefits; 21 and its own review of the available research, concluding that a reasonable person would consider it appropriate that the company would collect and use statistical scores as a tool to underwrite insurance policies, especially as the Ontario government had specifically allowed the use of credit information in calculating premiums and assessing risk. 22 Compare this to the press release issued by the IBAO on January 9, 2013: Federal Privacy Commissioner Releases Finding Supporting IBAO Concerns on Use of Credit Scoring Today, the Insurance Brokers Association of Ontario (IBAO) is urging the Ontario Government to take action on the use of credit scoring to price home and other personal property insurance. In mid-december, the Office of the Privacy Commissioner of Canada released a finding which supports IBAO s concerns that proper disclosure is not being provided to consumers when accessing credit information for insurance purposes. The use of credit information to determine insurance premiums only serves to make it more difficult, if not impossible, for brokers to meet important obligations to their consumers. In addition, the use of credit scoring is not being used to predict whether consumers will pay their bills. IBAO believes this practice is unfair to consumers, is not transparent, and is inappropriate as a rating tool. Furthermore, it has nothing to do with the insured risk. Nevertheless, many insurers are using credit scoring to significantly increase home insurance premiums [emphasis added]. This is very similar to the statements made in the IBAO blog on April 4, 2012, prior to the release of the Decision: 23 78% of Ontarians Are Not Aware Their Credit is Being Used Apr 04, 2012 Currently, a growing number of insurers are using a person s credit score to measure their insured risk. This has led to an increase in insurance premiums or a denial of insurance outright to many Ontarians. As a result, now is the time for the Ontario Government to ban credit scoring to protect consumers! In 2005, the Ontario government banned the practice of using credit scoring as it relates to auto insurance policies because a person s credit score was not related to 22

7 CANADIAN INSURANCE REGULATION REPORTER Volume 6 Number 3 their insured risk, and therefore the practice was deemed to be unfair and not in the public interest [emphasis added]. Based on the studies above and on the Decision itself, it appears that there are two serious misrepresentations in these statements. First, the statement that a person s credit score is not related to the insured risk is flatly contradictory to the studies and to the Commissioner s conclusions based on her own research. Second, while the IBAO states that the use of scores has led to an increase in insurance premiums or a denial of insurance outright to many Ontarians, it also leads, as identified by the FTC Report and others, to a decrease of insurance premiums for consumers identified as being of less risk as a result and approvals of insurance for other insureds who would not otherwise be able to obtain insurance. In short, an individual s credit score is not only related to their risk as an insured but can also have a beneficial effect on their ability to obtain insurance and reasonable premiums for it. 2. Was the Consent Sufficiently Transparent? The IBAO also identified inadequate disclosure of the purpose for the collection and use of such credit scores as being a significant problem. The Commissioner similarly expressed such a concern in the Decision. However, we would argue that, as outlined below, there were some significant flaws in the Commissioner s Decision on this issue. (a) The CSIO Form As noted by the OPC, the company against whom the Complaint was brought used the standard Centre for Studies in Insurance Operations ( CSIO ) 24 application form, which includes the following consent provision: (i) The Applicants agree that reports containing personal, credit, factual record, premium payment or claims history information may be sought or exchanged in connection with this application for insurance or renewal, extension, variation or cancellation thereof. 25 CSIO Standard Form While the OPC noted that the application form containing the consent was standard, they appear to have missed the significance as to whether the insurer in question should be penalized for using such a form adopted by the industry. As part of the preliminary report of investigation, the OPC recommended that the company amend its application consent clause to include consent for its collection and use of the statistical score. The Commissioner did subsequently note in the final reported finding that the insurer had informed her that it uses, like all major insurers, standard forms that are developed and provided by the CSIO for the property and casualty insurance industry as a whole, and that as such, it cannot unilaterally change any standard consent language used in application forms for insurance coverage; 26 the application form for property insurance was currently being revised by the industry such that the consent language now incorporated two potential uses by insurers of the credit information of applicants; and it was working with industry stakeholders to ensure that the consent wording adopted would be aligned with the provisions of the Code of Conduct for Insurers Use of Credit Information ( Code ) and the recommendations of the OPC. 27 In light of the foregoing, the insurer agreed to keep the OPC regularly informed on the progress 23

8 Volume 6 Number 3 CANADIAN INSURANCE REGULATION REPORTER of the consent language amendments until its completion and provide the OPC with a copy of the revised application form. However, notwithstanding this, the technical recommendation that the insurer amend the consent language remained in force. Given that the OPC agreed that all major insurers 28 use this consent form, the question arises as to whether CSIO rather than the insurer should have been the better target for the Commissioner s criticism of the CSIO form. In short, this element of the decision raises troubling questions as to fairness. (ii) Lack of Transparency in the Consent Provision The OPC identified its concern with the standard form consent by stating that it is not reasonable to expect an individual to understand that their credit score will be used in this way since the most obvious accepted use of this information by businesses is to establish an individual s credit worthiness in a loan or credit context 29 In short, the OPC concluded that the language used in the consent provision of the complainant s original insurance application was overly general and would not have led an applicant to infer that a change in credit score would impact his or her premium. Is this a fair assertion? The consent lists various types of information, including personal, credit, factual record, premium payment, or claims history information, as being used by the insurer. Credit information is just one item on that list. An express description of the purpose as being in connection with this application for insurance or renewal, extension, variation or cancellation thereof follows. How then could the OPC find that a reasonable person would select one of those categories of information credit information to then conclude that credit information was being used to establish [their] credit worthiness in a loan or credit context when there was no reference anywhere on the consent referencing such a purpose. Should the expectations of the insured not be reasonably conditioned by the fact that credit is simply one of a number of types of information listed on an insurance application form? By way of comparison, we can contrast the consent language on the CSIO form with the language of a sample bank credit application (the Bank Consent ) wherein the consumer consents to the bank: making any inquiries, including the collection of personal information, as [they] may deem necessary in order to verify the information set out herein and to reach a decision on any Application and administer such a loan, if one is made. 30 Is the language of this Bank Consent any clearer? Note that the consent is less descriptive than the CSIO consent as to the categories of information being collected (i.e., personal information, as [they] deem necessary ) is no more descriptive than the CSIO consent as to the purpose (i.e., to verify the information set out herein and to reach a decision on any Application and administer such a loan ) By way of example, note that the term credit worthiness is not referenced in this Bank Consent form. While it is arguable that the use of the information for the purpose of assessing credit worthiness is evident from the context (i.e., the consent is found on a credit application), the same logic should be applicable to a consent that is found on an insurance application (i.e., the use of the information for the purpose of assessing eligibility/premiums for insurance is evident from the context of an insurance application). 24

9 CANADIAN INSURANCE REGULATION REPORTER Volume 6 Number 3 (iii) Consumer Knowledge In the blog entry set out above, the IBAO references their own new consumer study as finding that 78% of Ontarians are not aware that insurers were using their credit scores to price their home insurance. Absent comparators, does this statistic have any meaning? More specifically, we would suggest that the average consumer would likely have very little awareness of the numerous factors, not just credit scores, that insurers assess in determining policy eligibility and premiums. In addition, recall the Bank Consent above authorizing the collection of personal information, as [they] may deem necessary in order to verify the information set out herein and to reach a decision. Again, we would posit that consumers would not be aware of a number of the factors that a bank may consider in determining whether or not to grant credit. In light of that general lack of knowledge, it would seem unreasonable to highlight credit score information as being worthy of particular attention. (iv) Adverse Inference Taken from the Existence of the IBC Code A final troubling aspect of the Decision was the OPC s interpretation about the significance of the Code of Conduct for Insurers Use of Credit Information, as issued by the Insurance Bureau of Canada (the IBC ) on December 14, The IBC issued the Code in order to provide insurers who use credit information in their underwriting and rating activities for personal insurance with guidelines on the use of credit information in accordance with principles of consumer protection and applicable federal and provincial laws. 31 Oddly, rather than viewing the existence of the voluntary Code as simply a cross-national guidance tool for an industry where the use of credit-based insurance scores is subject to a varying mix of provincial and federal privacy laws, the OPC drew an adverse inference from the existence of the Code itself: The insurance industry s own national association seems to recognize that using credit information is not entirely consistent with other tools typically used to assess insurance risk. In our view, the presence of the Code indicates that the IBC views the use of credit information as sufficiently different and separate from other tools to warrant special considerations around its usage and treatment. We also note that the Code guides insurance companies to not use credit information as a sole variable and to not deny quotes and insurance to customers who refuse to consent to the use of credit information. This suggests to us that IBC further recognizes that credit information is not a tool that is necessarily integral to assessing insurance risk. 32 In sum, the Commissioner unfortunately took the existence of the Code as being evident that there was something distinctly special about credit scores requiring additional disclosure to consumers. However, even more troubling was the OPC s conclusion that credit information is not a tool that is necessarily integral to assessing insurance risk because the Code guides insurance companies to not use credit information as a sole variable. This statement both (a) jumps to the erroneous conclusion that the prohibition on a credit score being a sole variable means that it is therefore not integral to assessing risk a conclusion appearing to illogically suggest that the only variables integral to assessing risk are those which can be used as a sole variable and (b) shows a gross misunderstanding as to how the assessment of risk in the insurance industry requires the assessment of a wide-ranging number of variables, none of which by themselves are necessarily integral. The existence of the Code and the guidance set out therein are fundamental to the OPC s treatment of the issue of transparency. The OPC found that the presence of the Code indicates that special 25

10 Volume 6 Number 3 CANADIAN INSURANCE REGULATION REPORTER considerations are required for the use of credit information and that the parameters set by the Code for obtaining consent in the context of using credit information in underwriting and rating activities for personal insurance, although voluntary in nature, should be followed. Therefore, the mere presence of the Code appears to raise the level of disclosure required to obtain consent for the use of creditbased insurance scores. (b) 26 The Insurer Privacy Notice sent on Renewal Finally, the OPC s response to the further assertion by the insurer that a two-page notice sent to policy holders at the time of their first policy renewal adequately explained the collection and use of creditrelated information is also worthy of note. The OPC held that the notice was misleading as it stated that while the company may use the score as one of the rating factors to determine premiums, the fact was that the company advised our Office that it obtains a statistical score at the first renewal of all policyholders in Ontario [emphasis added]. 33 One can assume that the use of the term may was intended to signify that it was in the insurer s discretion as to whether to use the credit score as a rating factor. The fact that the insurer had, in the past, exercised its discretion to use such score should not have been interpreted as imposing a requirement on the insurer to replace the word may with shall, as the finding appears to imply. This would then require the insurer to use the score in every case in the future, even in those circumstances where the insurer might otherwise feel it to be inappropriate. D. Conclusion In reviewing the Decision, one is left, perhaps unfairly, with the unfortunate impression that the Commissioner entered into the investigation process with a clear dislike for the use of credit scores for the purposes of insurance risk assessment but found her hands tied by the existence of the express permissive language of the Ontario Consumer Reporting Act. This impression is supported by the following two successive paragraphs of the Decision: In addition, we note that the use of credit information in the property insurance context is not permitted in all provinces. Insurance companies operating in Newfoundland and Labrador are now prohibited from using credit information in their personal insurance risk classification systems or using credit information to decline to issue, to terminate or to refuse to renew a contract of personal insurance. As such, this complaint has raised broader issues of concern for the Office. In our view, the long-term public policy impact stemming from the use of credit information for the purposes of assessing insurance risk is unknown at this time. Accordingly, the Office will continue to conduct research and monitor this trend and the Office s position may evolve over time. 34 The placement of these two paragraphs of the Decision in succession makes it sound as though the OPC would be interested in reopening this issue in order to prohibit the use of credit-based insurance scores in underwriting non-automobile insurance, were there be a change in the legislation in Ontario. Whether that would be the appropriate public policy choice by Ontario is a different matter, considering the conclusions made by the studies above. Credit scores have proved to have significant value as a risk-predictive factor and, notwithstanding the misperceptions fostered in the market, have acted and, given the opportunity, will continue to act for the benefit of consumers. [Editor s note: The authors would like to thank Heather Michel, student-at-law, for her assistance with this article.] 1 R.S.O. 1990, c. C.33, s. 8(1)(d)(iv). In contrast, the use of credit scores as a risk classification factor for auto insurance has been prohibited in Ontario since 2005, which

11 CANADIAN INSURANCE REGULATION REPORTER Volume 6 Number prohibition on the use of same as an unfair or deceptive act or practice was further tightened in 2010 under s. 2.1(4) of O. Reg. 7/00 ( Unfair or Deceptive Acts or Practices ) under the Insurance Act, R.S.O. 1990, c. I.8. S.B.C. 2004, c. 2, s. 108(1)(a)(iv). With the notable exception of Newfoundland and Labrador, which has expressly prohibited the use of credit information in risk classification or as a basis to terminate or refuse to renew a contract of personal insurance. Insurance Prohibited Underwriting Regulations, NLR 46/11, House of Assembly Newfoundland and Labrador, < 2011/nr htm>. Newfoundland and Labrador has also banned the practice for automobile insurance < In addition, the Alberta Superintendent of Insurance issued a bulletin in December 2008 to clarify that the automobile insurance application restricts the use of credit to a payment plan and that insurers must not refuse a quote if a consumer does not consent to allowing access to his or her credit score. However, there is no ban by law or regulation for the use of credit score outside of the application, provided the score is not used for an unfair practice. See < super_bulletin0408.pdf>. Credit Check Ban for Insurance Pondered, CBC News, November 29, 2012, < prince-edward-island/story/2012/11/29/pei-credit-ratinginsurance-584.html>. S.C. 2000, c. 5 [PIPEDA]. Office of the Privacy Commissioner of Canada, Report of Findings # : Ontario Insurance Company Used Credit Information to Assess Risk; Calculate Premiums, < Supra note 5, s. 5. (3). Ibid. at Principle of Schedule 1. Canadian Council of Insurance Regulators, Report on the Credit-Based Insurance Scoring Questionnaire, August 2009, < CBIS_Report_2009_CCIR_EN.pdf>, p. 2. Ibid. at 2, 4. Supra note 6 at para. 15. Federal Trade Commission, Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance, July 2007, < P044804FACTA_Report_Credit- Based_Insurance_Scores.pdf> at 3. Ibid. at Frank M. Fitzgerald, The Use of Insurance Credit Scoring in Automobile and Homeowners Insurance, December 2002, < cis_ofis_credit_scoring_report_52885_7.pdf> at 22. Ibid. at 17. Ibid. American Academy of Actuaries, Risk Classification Subcommittee of the Property/Casualty Products, Pricing, and Market Committee, The Use of Credit History for Personal Lines of Insurance: Report to the National Association of Insurance Commissioners, November 15, 2002, < credit_dec02.pdf> at 3, 6. Supra note 6 at para. 24. Ibid. at para. 26. Ibid. Ibid at para 28. Ibid. at para. 27. Or as the Decision s double negative language stated it: [that the OPC] could not conclude that a reasonable person would not consider it appropriate. Insurance Brokers Association Ontario Blog; Seventy- Eight Per Cent of Ontarians Are Not Aware Their Credit Is Being Used, April 4, 2012, < 78-of-ontarians-are-not-aware-their-credit-is-being-used>. CSIO is Canada s national standards association of property and casualty insurers, insurance brokers, and software providers. Supra note 6 at para. 6. Note that CSIO s working groups review and set standardized forms, which members follow as a consistent means of documenting insurance policy information across the country. Therefore, the forms produced by CSIO are frequently seen as industry standard. See CSIO, Forms Working Groups, < Supra note 6 at para. 45. Ibid. Ibid. at para. 38. Business Development Bank of Canada, Statement of Personal Affairs, < doc_corpo/forms/f4037e.pdf>. Insurance Bureau of Canada, < de_of_conduct.pdf> at 1. Supra note 6 at para. 31. Ibid. at para. 40. Ibid. at paras

12 Volume 6 Number 3 CANADIAN INSURANCE REGULATION REPORTER INVITATION TO OUR READERS Have you written an article that you think would be appropriate for the Canadian Insurance Regulation Reporter? Do you have any ideas or suggestions for topics you would like to see featured in future issues of the Canadian Insurance Regulation Reporter? Please feel free to submit your articles, ideas, and suggestions at <cirr@lexisnexis.ca> and <scarruthers@stikeman.com>. We look forward to hearing from you! 28