A recent decision of the Office of the Privacy Commissioner of Canada (the "Commissioner"),  finding that analyzing a customer's credit rating does little to help counter insurance fraud, will seem shocking to many in the insurance industry. In making this decision, the Commissioner has denounced something that is common industry practice in assessing the legitimacy of claims.1

Details of the Decision

This decision arises out of an Ontario motor vehicle accident claim. The Commissioner ruled that The Personal Insurance Company ("The Personal") violated a senior citizen's privacy rights when it accessed his credit rating in the course of handling his motor vehicle accident claim for Section B benefits. The Personal asserted that this practice was employed to assist in detecting and preventing fraud.  However, in response to the decision that The Personal failed to establish how the collection and use of credit scores is necessary and effective in preventing and detecting fraud as alleged, The Personal has promised to cease using credit scores to assess motor vehicle claims by April 22, 2017.

While advocacy groups, such as the Victims for Accident Insurance Reform, were quick to accuse insurance companies of using claimants' credit scores to determine the extent to which they could lowball the settlement of their claims, The Personal denied that insurers use credit data for any purpose other than to fight fraud.

The Commissioner also took issue with the manner in which The Personal obtained consent from the claimant to access his credit score. In fact, the adjuster's allegedly "aggressive" interview with the claimant, where he requested consent to access his credit score, was reportedly what prompted the gentleman to complain to the Commissioner. The Commissioner found that The Personal did not obtain proper "meaningful" consent from the claimant to gain access to his credit score, nor was the insurer as open as it should be about how it uses credit information in the claims assessment process.

Common Industry Practice

The use of claimants' credit information is common practice throughout the insurance industry. For example, it may be used in analyzing cases of vehicles being reported stolen and found "totaled", or burned out. In such cases, credit scores are a tool insurers use to review claims closely and ascertain whether or not there is motive for committing fraud. For instance, if the credit score reveals a claimant's significant debt load, an insurer might proceed with further inspection of the circumstances of the loss, such as having an engineer inspect the damaged vehicle or analyze the Event Data Recorder.

Ultimately, the credit history in these sorts of claims can be relevant to the insured's motivation in making the claim, and can be important to insurers as a means to uncover the truth about how the loss occurred. A poor credit score can be one of many red flags that alert an insurer to potential fraud, though it certainly is not determinative.

What Does This Decision Mean for Alberta's Insurers?

Based on this decision, insurers in Alberta should think twice before running a credit history as part of making a determination with respect to a claim. While the Commissioner did not publish written reasons (or in any event, has not yet done so), the decision was made with respect to quite a narrow issue, being the use of a claimant's credit score in a claim for specific benefits (namely, benefits under "Section B" of the standard policy). The take-home message of the case should not, therefore, be extrapolated to conclude that the use of a credit score in assessing any insurance claim will be found to be a breach of privacy.

Taking this into account, the practical effect of the Commissioner's decision likely will not bear heavily on Alberta insurers' practice to use credit scores as a tool for uncovering potentially fraudulent claims. At the end of the day, the decision does not extend to the use of credit scores in assessing all claims.

Having said this, insurers should take note of the Commissioner's comments with respect to properly obtaining a claimant's consent. In all cases, informed consent must be given by the claimant to access information such as their credit scores. This decision seems to indicate that there must be a more fulsome disclosure to the insured of how credit information is used in the claims process in order to qualify as meaningful consent.  This direction is in line with the Insurance Bureau of Canada's Code of Conduct for Insurers' Use of Credit Information, which requires insurers to obtain a customer's informed and express consent prior to collecting credit information.


1 McLennan Ross LLP reached out to the Commissioner to request the published decision for the purposes of analyzing it and its effects on the insurance industry. However, the Commissioner's Office explained that they do not have a published decision yet.

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