Auto insurers should stop asking for people's credit history: advocate

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New Brunswick insurance companies have begun asking people for their credit scores if they want a rebate on their auto insurance premiums, a controversial practice that a consumer advocate says should be banned.

Michèle Pelletier, New Brunswick’s consumer advocate for insurance, made her first-ever appearance before a legislative committee on Friday.

Politicians asking her questions expressed outrage over the credit history demand, including Progressive Conservative MLA Dorothy Shephard, who thinks her government needs to consider tougher rules.

“Insurance companies are making a lot of money,” said the MLA for Saint John-Lancaster and former cabinet minister. “And I hate to be cynical, but it’s hard enough to keep your privacy private these days.”

Shephard brought up the topic during the session because her insurance company had asked about her credit history, and it struck a nerve.

“I was shocked that a couple of years ago when I was just going over some information with my home insurer, they asked if they could do a credit check,” said the former businesswoman who said she’d been dealing with the same company for close to 30 years with no issues.

“And I have to say I got really offended that insurance companies have the ability to ask if they can do a credit check on you. And I would think it would put a ton of people at a disadvantage.”

Pelletier told the politician that credit checks have always been common for property insurance, which is less regulated across Canada, because such protection for people’s homes is not mandatory unless a mortgage lender demands it.

In New Brunswick, the insurance board said ‘Our hands are tied. Since it’s not prohibited, we have to let them use it.’

Michèle Pelletier

People with a bad credit history, such as not paying their bills on time, are considered higher risk and are often forced to pay higher premiums for their home insurance.

Auto insurance, on the other hand, is a legal requirement and more strictly regulated.

“There had been a consensus among auto insurers that they were not going to use credit checks. A couple of years ago, they started to ask for it,” said Pelletier, adding that every time an auto insurer wants to ask for people’s credit scores, they must do so at a hearing in front of the New Brunswick Insurance Board.

“At these hearings, every time, I was saying that I was against it. Some provinces, not most, allow it. Some don’t allow it. In New Brunswick, the insurance board said ‘Our hands are tied. Since it’s not prohibited, we have to let them use it.’”

The board, a quasi-judicial administrative tribunal, was created in 2004 by Bernard Lord’s Tory government after he nearly lost the general election the previous year on the issue of skyrocketing auto insurance premiums.

An individual’s credit score would be just one metric insurers use, and one that is a benefit to many New Brunswick consumers.

Graham Little

The Insurance Bureau of Canada told Brunswick News on Friday that insurance providers use a credit score to offer discounts, not increases.

“Different governments have reviewed the practice over the years,” said Graham Little, the bureau’s director of government relations for the Atlantic region. “Insurers must include this information when filing for rate approvals through the New Brunswick Insurance Board. Insurers that use credit scoring histories today, do so to offer discounts.”

Little also said that his organization had developed, with its members, a code of conduct for insurers’ use of credit information.

“New Brunswick has a very competitive auto insurance marketplace. An individual’s credit score would be just one metric insurers use, and one that is a benefit to many New Brunswick consumers.”

According to cardata.com, New Brunswick’s average auto insurance premiums last year were middle of the pack in Canada, at $2,187 a year, or $183 monthly.

But Pelletier, who advocates on behalf of New Brunswickers who have issues with their insurance, said some people can’t get a break on their premiums because of a lack of credit history, through no fault of their own.

“Let’s say, my grandmother. She never owned anything because back then, everything was under my grandfather’s name. My grandfather dies, but my grandmother still wants to have a car, under her name. But she never had credit because my grandfather took care of all the finances. That’s not fair.”

Tory MLA Jeff Carr wasn’t impressed.

We’re held hostage by insurance companies.

Jeff Carr

He said an elderly person shouldn’t have to call Pelletier’s office for help because if an insurance company really wanted their business, they’d take the initiative and find out why someone might not have a credit history. Pelletier’s office received more than 1,300 requests from New Brunswickers last year, half of them about auto insurance.

Carr said the insurance companies seem to get “everything they need or want and they run the show. We’re held hostage by insurance companies.”

Afterward, Pelletier told Brunswick News she didn’t know what the average rebate would be if someone had a good credit check.

She said she would support any move to clamp down on the practice.

“Think of newcomers to our province. They have no history of credit here in New Brunswick. So they wouldn’t benefit from this discount. With others, they might have bad luck. What if they got sick and missed a few payments on a credit card bill? So, yes, I think the practice should stop.”

Shephard told Brunswick News she wants to have a conversation with the rest of her Tory caucus to see how they feel about the issue. Only seven of 28 Progressive Conservative MLAs serve on the committee that sat Friday.

I just think it will put many, many people at a big disadvantage.

Dorothy Shephard

She said it’s possible insurance providers are using the credit history to charge higher premiums.

“It doesn’t really affect me. But seniors who have never used credit their whole lives might be affected by this,” she said. “I just think it will put many, many people at a big disadvantage. And I’m sorry if I seem jaded, but I don’t think it’s being asked to give people a discount.”