Bills up to date? New Brunswick auto insurance companies are interested in your credit score

A number of auto insurance companies in New Brunswick have begun using consumer credit scores to formulate premiums for drivers, a practice New Brunswick political leaders once vowed to outlaw and critics worry will unfairly penalize low income motorists.

"We submit that insurers should not be able to use credit scores for rating," wrote New Brunswick Consumer Advocate for Insurance Michèle Pelletier in opposing a request last fall from the TD Insurance company Primmum to begin using credit histories .

"Insurers are already using driving records to determine risks.  Using credit scores could negatively impact availability and price offered to insureds who can least afford insurance," 

In a series of hearings beginning last year in front of the New Brunswick Insurance Board, some of the province's largest insurance companies have come forward to argue poor credit is a "strong statistical predictor" of whether a driver might make a future claim. They have been asking permission to reward good credit customers with discounts.

The practice is allowed in some provinces like Nova Scotia but banned in others like Ontario and Newfoundland and Labrador. The issue has been debated off and on in New Brunswick for more than a decade.  

Recently companies began a renewed push for its adoption.

Earlier this year New Brunswick's largest auto insurer, Wawanesa, made the argument in an application to the Insurance Board that poor credit reveals something about a person's character. It argued it should be allowed to act on that in setting premiums, even for those with otherwise pristine driving records.

"(Wawanesa) argues that an individual's level of risk taking, risk tolerance and responsibility with financial matters, as reflected in his/ her credit score, is a behaviour reflected in other expressions of risk taking, risk tolerance and responsibility, " said the Insurance Board in a summary of Wawanesa's position.  

According to the Board's recounting of the company's position, everything from a person's  "driving patterns, risk avoidance and a general level of care," can be inferred from a credit report.

"Those policyholders who are likely to generate the highest costs will be charged more than those who are likely to generate lower costs," Wawanesa said of its intended use of the credit information 

The company's application was granted. 

The Board found studies presented by Wawanesa and other insurance companies and statistics drawn from insurers experience in New Brunswick supported the case that drivers with poor credit histories are more likely to make future accident claims.  

As well, the Insurance Board ruled because New Brunswick MLAs did not follow through on promises to prohibit credit scores from being used by insurance companies, there was little it could do but approve company proposals.

"It is not prohibited by legislation in New Brunswick, as it is in some other Canadian provinces," wrote the Board in its decision on Primmum's request to consider credit scores. 

"Despite some public discussion several years ago by legislators in this regard, no legislation was ever enacted which prohibited this approach, and the current applicable legislation and regulation do not prohibit the use of credit score as a rating variable."

Government previously considered ban on practice

In 2010 the former New Brunswick government of Shawn Graham introduced legislation to set up a ban on insurance companies using customer credit scores.

Then Attorney General Kelly Lamrock said he didn't doubt insurance companies could make a convincing case about  a correlation between customer credit histories and higher claims, but he argued the potential harm of the practice, especially for low income drivers with bad credit who do not make claims, was too significant.

"Poverty tends to lead to bad credit," said Lamrock.

"We do not think that you should be making judgments about an individual because that individual happens to be a member of a group that tends to have certain outcomes. You cannot use that as a basis for setting rates."

Progressive Conservatives under then leader David Alward supported the ban and the legislation passed with wide support but regulations required to support the policy have never been adopted.

In an interview, Pelletier said, even though no formal ban was enacted, she believed insurance companies understood how political leaders felt and had long ago dropped the issue.  She has been surprised by the way it has suddenly resurfaced.

"It was supposed to be prohibited but the government changed and this bill never came into force," said Pelletier. 

"There was kind of an understanding they would not use it but they have asked and, since it was not prohibited, the New Brunswick Insurance Board is permitting it."

To date five auto insurance companies, including Wawanesa, Intact and three companies in the TD Insurance group, including TD, Primmum and Security National have been approved to use credit scores.  

Co-Operators and two Allstate companies, including Pembridge and Allstate have requests pending.  

Combined the eight companies insure about half of New Brunswick's 522,000 private passenger vehicles.

Details of how drivers with good credit scores will be rewarded are unclear.  

Under rules established by the Insurance Board drivers have to give permission to companies to access their credit reports and have a right to decline without facing a financial penalty in their rates.

But there is little information about how high a credit score has to be to attract a discount and how much of a discount will be offered.

In the decision on Wawanesa's application, the Board did reveal the company plans to offer a five per cent discount at the lowest acceptable credit score with increasing discounts for drivers with excellent credit. 

Beyond that little is known.

"The specific credit score discount details are considered a confidential portion of the rate filings,"  wrote executive director and secretary to the Insurance Board Kevin Duff in an email

"The Board can't release those details."

In emails Thursday, representatives from both Wawanesa and Intact said credit information on customers who volunteer to share it will be used only to reward those with good credit.  Those with poor credit or who refuse to share their information will not be penalized, both insisted. 

"No Intact customer will be declined, non-renewed or have their premium increased as a result of their credit score," wrote Intact's Kate Moseley-Williams.

Wawanesa's Brad Hartle agreed.

"Customers are under no obligation to agree to the use of their credit score or a credit check, and we will never decline to offer anyone a policy or coverage because they have declined access to their credit score," he wrote.

The TD group of companies has not yet responded to a request for comment.