P.E.I. has drafted legislation that would ban credit scoring in both home and auto lines.
The proposed changes to the province’s Insurance Act are dated November 26, 2012. The government is asking for public comments on its draft legislation by January 11, 2013.
The move comes shortly after the Canadian Council of Insurance Regulators (CCIR) has issued a final report on credit scoring. The CCIR report effectively concludes that the individual provinces must determine for themselves how to address the issue of insurers using credit scores to underwrite insurance.
P.E.I. brokers have expressed concern about credit scoring in the past.
In a consultation paper accompanying the draft regulations, the provincial government notes that insurers have “increasingly” using credit history, credit rating, credit score or credit-based insurance scores in determining whether they would offer residential property insurance and/or private passenger vehicle insurance to consumers and, if so, at what rate.
“Government has received complaints that this practice has resulted in some individuals either not being offered insurance, or only being offered insurance at unaffordable rates,” the province said in a statement. “The practice of using the above noted criteria is currently not widespread in Prince Edward Island. However, if the use of the criteria is not banned it might become widespread in the near future.
“That in turn, may lead to significant availability and affordability issues within the province, with respect to these insurance products.”
The draft legislation states:
“No insurer shall establish an insurance rating classification in respect of a contract of residential property insurance to distinguish between insured persons on the basis of any of the following grounds with respect to an applicant for insurance or a person who would be an insured person under the contract:
• the credit history, credit rating, credit score or credit-based insurance score of the applicant or person;
• the income level of the applicant or person;
• the gross or net worth of the applicant or person;
• the indebtedness of the applicant or person;
• whether the applicant or person has a credit card; or
• whether the applicant or person has made late or dishonoured premium payments in respect of a contract of insurance that was not terminated by reason of the late or dishonoured premium payments.”
