Auto insurance companies do not need to check credit scores for claims says Privacy Commissioner

Published: April 1, 2017

Updated: July 24, 2018

Author: Luke Jones

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The federal Privacy Commissioner has reprimanded an insurance company for violating consumer privacy rights related to an incident involving a car-crash victim.

The Personal Insurance Company was found to have accessed the credit rating of a senior citizen, with the Privacy Commissioner arguing there was no need to do so. In defence, the company says it needed the information to find fraudulent claims activity. Matching credit worthiness can help determine if a customer is likely to cheat insurers.

In its decision, the commissioner set a precedent as it is presumed this type of credit scoring gathering is standard practise in the insurance industry. However, there is little evidence to suggest that insurance fraud and credit ratings are connected, according to Rhona DesRoches, head of the Association of Victims for Accident Insurance Reform.

DesRoches says companies really want to see a client’s financial situation to see if they can get away with paying lower amounts.

“This is very worrisome,” DesRoches said. “Just knowing how much debt a person carries might be an indicator of what that breaking point is … If they know a person is in dire financial straits, then they know how far along that person might go before giving in to perhaps a lower settlement than they should.”

In response, The Personal says it will now stop checking credit scores in relation to auto insurance claims by April 22.