N.B. targets credit-score insurance screening

The New Brunswick government is looking at legislation that would stop insurance companies from basing premiums on customers' credit scores, says the provincial consumer advocate for insurance.

If implemented, New Brunswick would become the first province to ban the practice, said Ronald Godin, who criticized the industry in his annual report, released Tuesday.

As it stands, the practiceis currently being used by a limited number of companies and only for house insurance, said Godin, based on complaintstohis office. But heexpressed concerns that the practice could grow in popularity and expand to include other types of insurance, such as auto.

A bad credit rating can double a customer's premiums, while some companies have even refused to renew policies, said Godin.

The problem is that credit ratings don't paint an accurate picture of someone's insurance risk, he said.

"Credit scoring captures people that are innocent in the sense that it's as a result of illness, as a result of loss employment, as a result of a business venture that's gone wrong.

"You're a young couple, you're just starting out, of course you've got loans and your ratio is quite high. Or seniors who have had no credit history for many years."

A bad credit rating can follow people for up to six years, said Godin.

It means those who can least afford it are having the hardest time getting insurance, he said.

"The use of credit scoring by insurance companies as an underwriting tool for personal property is not anew practice, but it's becoming more and more prevalent,"the report states.

Godin estimates about 20 per cent of insurance companies in the province currently use credit ratings when calculating premiums.

"We have serious concerns with this practice and we feel very strongly that it is not in the best interest of consumers seeking to purchase or renew their insurance," he wrote.

"As a matter of social policy it should not be allowed in the property and casualty industry market."