Canadian insurer slammed for checking client credit score

Published: August 28, 2017

Updated: July 24, 2018

Author: Luke Jones

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Canadians are protected by law from insurance companies checking their credit score when checking a claim. However, one Ontario-based insurer did just that and was recently reprimanded by regulators.

The company argued it was necessary to view the client credit score to ensure the claim was not an attempted fraud. However, even under this suspicion, the client should have been protected under the law.

Rhona DesRoches, who heads the Association of Victims for Accident Insurance Reform, was scathing in her assessment of the company accessing the credit information:

“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.”

However, the laws are not entirely clear. For example, insurance providers are permitted to access credit scores when assessing home insurance, but not for auto insurance.

Most Canadians know that a credit score is important and can have an impact on financial life, both negatively and positively. However, it is supposed to assess a consumer’s eligibility to gain credit on a purchase. Insurance is not such a purchase and under Ontario law all customers have the right to auto insurance unless they have been banned from driving.

Even if an insurer could conduct a credit check for auto, as it could for home insurance, there is no reason why the insurance company should deny coverage based on a bad score. Though, there could be an instance where the insurer would demand a premium paid in full if a customer score is bad.