Credit score and home insurance
The Co-operators now uses credit score as a rating factor to determine home insurance premiums. The value of utilizing credit score has been demonstrated as a useful and accurate predictor for future home insurance claims. In fact, most major property insurers in Canada have been using credit score for years. We have added credit score to other more traditional rating factors such as claims history, age of home and geographical location to determine the level of risk and appropriate premium. Credit score reflects a client’s level of responsibility and behaviour when it comes to managing their finances. Analysis shows a direct link between a person’s credit score and the frequency and severity of claims. By adopting this factor, we are able to more accurately rate individual clients by customizing rates and charging an appropriate premium for the risk. Clients with good credit scores will benefit by receiving the most competitive premium.
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Definitions
Credit score - A credit score is a number used by lenders as an indicator of how likely you are to repay your loans. Your credit score is generated by using a mathematical formula utilizing data from your credit report. Lenders have been using credit scores as part of the lending decision for many years. The Co-operators will be using TransUnion to obtain credit scores (but not credit reports).
Credit report - Along with the credit histories of millions of other people, your credit history is recorded in files maintained by at least one of Canada’s two major credit reporting agencies: Equifax and TransUnion. These files are called credit reports. A credit report is a “snapshot” of your credit history, including available credit and payment history.
Credit inquiry - A credit inquiry is a notation on an individual’s credit report to identify that a company requested to utilize your credit information.
Soft inquiry - A "soft" inquiry may be obtained when the purpose is not to make a lending decision, such as when an insurance quote is requested. "Soft" inquiries are visible only to you, require your permission to be obtained, do not apply when your score is evaluated, and do not affect your credit score.
How does credit score impact a client’s premium?
The factors used to determine the premium a client pays for their home insurance are specific to individual coverage needs. The premium amount is directly related to a number of rating factors, including:
Other rating factors could include:
Frequently asked questions
Why would The Co-operators want to use credit score as a rating factor?Credit score tends to reflect a client’s level of responsibility and behaviour when it comes to managing their finances. Actuarial analysis (including a recent study by The Co-operators) shows a direct link between credit score and the frequency and severity of claims. By adopting this factor, we are able to more accurately rate individual clients by customizing rates and charging an appropriate rate for the risk. The good news is that clients with good credit scores will benefit by receiving the most competitive premium.
Which product lines will be affected? Credit score will only be used on the rating of home insurance, except in the province of Quebec where it is also permitted for auto insurance. How do I benefit from The Co-operators using my credit score? Using credit score as a rating factor gives us an opportunity to provide a more competitive premium to those clients with better than average credit scores.
I have been a client of The Co-operators for many years; doesn’t my payment and claims history still count? Of course, and we will still use all relevant information to calculate your home insurance premium – including your payment and claims history. Credit score is simply one more factor added to the calculation.
What happens if I don’t want The Co-operators to use or access my credit score? If you do not want us to access your credit score, we will respect your wishes. However, we will not be able to provide an accurate or competitive premium that reflects the risk we are insuring. As a result, you will not receive the best possible premium available. We will not refuse to provide a quote or coverage if you withhold permission to check your credit score.
Will The Co-operators credit inquiry affect my credit score? No. The presence of a “soft” credit inquiry will not impact your credit score. A common misconception is that every inquiry decreases your credit score by a certain number of points. This is not true. All inquiries are recorded on your personal credit report to ensure you can become knowledgeable of the organizations using your credit information; however a credit score inquiry for insurance purposes will not impact your credit score.
How often will The Co-operators access and check my score for insurance purposes? We will access your credit score once per year and apply that score to the renewal premium, along with all other rating factors we have used in the past. Does the use of a credit score constitute a discriminatory practice? No. We value integrity, accountability and transparency. We have conducted our own analysis and found no discriminatory links. Credit score is only a reflection of the person’s level of responsibility to meet their financial obligations. We are confident that using credit score is both a scientifically valid and ethical practice.
Are credit scores always accurate? A study was conducted by the Public Interest Advocacy Centre (PIAC), and they found that 18% of people surveyed discovered some type of error in their report. Most of the errors had only a small impact on their overall score. TransUnion scores are based on the accuracy of the information collected from many other institutions; however, it is up to individual consumers to ensure the accuracy of their credit information. By law, upon request from the consumer companies like TransUnion must provide, at no cost, a complete account of all the information on your credit report “Consumer Disclosure”. Consumers can then address any issues that may have led to an inaccurate credit score calculation. There is a cost to the consumer to obtain their credit score (it is not included with the report). If all the information is correct on the report, and the consumer doesn’t want to pay to obtain their score, they could expect their score to be accurate since it is based on the information contained in the report.
Can I check my credit report and score? It’s a good idea to request a copy of your credit report from a credit reporting agency at least once per year to verify that your personal information is up to date, that your financial information is correct and to ensure that you have not been the victim of identify theft. You can request a copy of your credit report and score at www.transunion.ca. You may also request a Consumer Disclosure which is a complete copy of your information, including all soft inquiries by mail.
What if I don’t have a credit score? Some individuals (e.g. young adults) may not have a credit score due to a lack of credit history. If you do not have a credit score – or we cannot find a credit score for you – we will not apply a credit score rating factor to your home insurance premium. This means there will be no impact (up or down) on your premium. How can I obtain my credit report and/or credit score? You can check your credit report and score at www.transunion.ca. You may also request a complete copy of your information, excluding credit score, by mail. We use TransUnion as a supplier of credit scores. You can reach them at: 1-866-525-0262 or at www.transunion.ca.
Consumer privacy and consent
The Co-operators is committed to protecting the privacy, confidentiality, accuracy and security of the personal information we collect, use, retain and disclose in the course of conducting business – including the collection and use of our clients’ credit scores. The information we exchange with TransUnion travels through a secure data transmission channel. Your credit score is not visible to anyone in our offices and is automatically applied to the calculation of your home premium. To view our entire privacy policy please click here. We understand that clients view their credit score as sensitive, personal information. Therefore, we obtain consent to check credit score from every home insurance client as part of the application process. We also notify all new clients of our need to collect personal information as part of our Disclosure and Privacy statement. As mentioned earlier, clients are able to “opt out” of providing their credit score by contacting their agent, but this will result in a less competitive premium.
Credit resources
If you would like more information on credit score, please click here and you will be redirected to the TransUnion website.
Helpful links
The following links will provide you with some additional information in regards to credit scores:
