Two interested parties have expressed concerns to the New Brunswick government that proposed changes to insurance rules could mean consumers pay more for premiums.
In the last session of the legislature, Justice and Consumer Affairs Minister Marie-Claude Blais said the government is committed to moving forward with regulations that would prohibit the use of credit scores in underwriting insurance policies. It's an issue that has been a topic of discussion for some time now.
Ronald Godin, the consumer advocate for insurance for New Brunswick, commented earlier this year that more and more people are complaining about home insurance and the callers are upset that credit scores are being used to determine their premiums. He said about half of the home insurance companies in New Brunswick use the scoring to determine rates and if a policy should be renewed or granted in the first place. He said no company is consulting credit scores to set auto insurance rates, but there are no rules preventing that.
The Liberals then began calling for the practise to be discontinued, saying people were being refused home insurance because of a bad credit score, which is unfair. Liberal MLA Donald Arseneault said if someone loses their job and falls behind on their bills they could get a bad credit grade and lose their home insurance as a result.
The public and interested parties were invited to comment on the proposed legislation changes and at least two different organizations have opposed the change, saying the result will be higher insurance premiums.
TransUnion, a credit information management company, sent the Justice and Consumer Affairs Department a letter last week expressing "significant concerns" with the proposed changes. TransUnion president Ken Porter said overall higher rates will result.
"Most notably, we believe that the regulations' intent to prohibit the use of credit information to establish an insurance rating classification will lead directly to higher out-of-pocket expenses for the majority of New Brunswick policy holders," wrote the company president.
"Pursuant to the draft regulations . . . insurance companies would be disallowed from accessing an applicant's 'credit history, credit rating, credit score for the purposes of establishing an insurance rating classification.' Under this framework, the majority of New Brunswickers would be inadvertently punished for earning a good credit score because they would share risk with applicants who have poor credit."
Porter wrote that a number of TransUnion's insurance company clients have repeatedly indicated that the use of credit scores afford them the ability to deliver discounted premiums to an average of two-thirds of their clients.
Porter said consumers should continue to be allowed to voluntarily provide this information as a means of accessing lower insurance premiums.
"Good public policy should reward those New Brunswickers who have, through responsible credit management, earned the chance to reduce the cost of their premiums and save their hard-earned money," he wrote.
Consumers' Association of Canada president Bruce Cran also sent a letter to the New Brunswick government expressing similar concerns.
"By effectively taking away this freedom from consumers, the Government of New Brunswick is putting in place a set of rules and conditions that make it impossible for consumers who have good credit history to benefit in the form of lower premiums," he wrote. "This is contrary to the principle that good public policy should reward - not punish - those New Brunswickers who have, through responsible credit management, earned the chance to reduce the cost of their premiums and save their hard-earned money."
