Regulation (July 01, 2009)

IBABC CALLS FOR BAN ON CREDIT SCORING

The Insurance Brokers Association of B. C. (IBABC) has asked the B. C. government for legislative changes that would prohibit insurers’ ability to collect information for the purpose of credit scoring.

“Our position is that we don’t want credit scoring to be an underwriting factor in B. C., and the best way to ensure that is to prohibit it by statute,” Trudy Lancelyn, deputy executive director of IBABC, said in an email.

IBABC observes on its Web site that Alberta’s superintendent of insurance in December 2008 issued a notice that insurers could be fined up to Cdn$25,000 for requiring a customer to consent to a credit report as a condition of obtaining a policy premium quote.

“While IBABC is not aware of credit-scoring abuses with insurance transactions in B. C., the IBABC is concerned that current legislation actually enables the practice,” IBABC says in an online posting.

ONTARIO REGULATOR “ACTIVELY REVIEWS” USE OF CREDIT SCORING

“Almost all” of Ontario’s insurers have indicated to the province’s insurance regulator, the Financial Services Commission of Ontario (FSCO), that they understand FSCO’s concerns about credit scoring, expressed in a February 2009 bulletin.

They have also indicated that if they don’t already conform to the practices outlined in the bulletin, they plan to do so in the near future.

“In response to the replies that have been received, FSCO is in the process of following up with insurers that submitted remediation plans with their forms, or identified issues that require further review,” the regulator said in a follow-up bulletin.

FSCO added it is continuing to “actively review” the credit scoring issue.

“Statements from automobile insurance industry participants that suggest the review is complete, or that FSCO has determined that specific insurance companies are in conformance with the bulletin, are incorrect and should be disregarded,” the regulator says in its Bulletin A-03/09–Automobile Insurance Quoting and Underwriting Practices.

OSFI RULES A BANK WEB SITE IS NOT A BRANCH

The Office of the Superintendent of Financial Institutions (OSFI) has ruled that a bank’s Web site is not a branch, and it can therefore promote and sell insurance products or services on its Web site.

The Insurance Brokers Association of Canada had asked OSFI to clarify the issue of whether or not a bank that promoted and sold insurance through its Web site constituted a breach of the Bank Act.

The Bank Act specifies that a bank must sell insurance in a building that is separate and distinct from its bank branches.

In a ruling posted on June 30, OSFI says that the Bank Act’s definition of “branch” refers to physical premises.

“Furthermore, there are numerous provisions in that statute that specifically distinguish a Web site from being a branch,” the ruling says.

The definition of a “branch” under the act is as follows: (a) in respect of a bank, means an agency, the head office or any other office of the bank, and; (b) in respect of an authorized foreign bank, means an agency, the principal office or any other office of the authorized foreign bank in Canada at which is carried on the business in Canada of the authorized foreign bank.

“OSFI concluded that, for purposes of the regulations, a bank Web site is not a bank branch,” the ruling says. “As a result, a bank may, on its Web site, promote in Canada any insurance policies or any insurance companies, agents or brokers, subject to the conditions that the regulations impose on such promotion outside a branch.”