Canadian Underwriter quotes Bryan Yetman, president of the Insurance Brokers Association of Ontario:
Most consumers understand that their proximity to a fire hydrant or the fact that they have a theft alarm can impact their rates. They do not, however, understand what their credit score has to do with the likelihood of their home catching fire or being hit by lightning.
Interesting, since most U.S. insurance professionals support using credit scores to rate insurance. The actuarial community generally favors them, too, as the link between credit scores and driving records is well-established. Some states, of course, ban the practice.
In using credit scores, actuaries aren’t trying to punish people with poor credit records. And they aren’t saying poor credit causes you to be a bad driver, or vice versa. They are noticing that people with low credit scores tend to have poor driving records. In other words, they see correlation, not causation. And they are adjusting their rates accordingly.
Now credit reports are notoriously inaccurate, and that means some people are being rated inaccurately. The insurance industry should support efforts to require credit scoring firms to be responsible for the accuracy of their records. This would mean fairer rates for everyone.