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Insurance Screening Based On Credit Score Targeted By New Brunswick Government

By Sally Maison
Published: Thursday, April 8th, 2010

FANCY-00006787-001The insurance consumer advocate in New Brunswick said that the local government is considering passing legislation to prevent insurance providers from reviewing the credit scores of the applicant before issuing an insurance policy.

Criticizing the current policy in his annual report that was released on Tuesday, Ronald Godin said that once the new legislation came into effect, New Brunswick will be first province of the United States to eradicate this policy.

On the basis of customer complaints he receives on a daily basis at his office, Godin said that at present only a few insurance providers follow this policy, especially the providers offering insurance on home. However, he expressed concern that this policy might gain popularity and spread wings and envelop auto insurance and other sectors as well.

There can be many negative repercussions on the consumers if this policy gains popularity. Godin said that while some insurance companies currently double the premiums for a customer with a poor credit score, there are a few others that completely refuse coverage.

He also mentioned that there could be a myriad of reasons for a poor credit score. Some innocent and responsible too might end up with a poor credit score due to prolonged illness, loss of employment or a startup business venture that didn’t take off too well.

Young couples just starting their life together may also have a high ratio due to a few essential loans. Elderly people who lack a credit history also may not have a great credit score. Denying such customers insurance coverage due to a poor credit score is far from being fair.

Godin went on to mention that the credit score of a person is not the right way of measuring the insurance liability of a person. He reiterated this by saying the a  poor credit rating will stay on the customer’s financial report for close to six years, which can be a pretty long time.

He said that the consumers who need the insurance coverage the most are the ones being turned back by the companies.

The report released on Tuesday clearly states that the practice of considering the credit score by the insurance providers is not a recent practice. Though this has been prevalent for quite a few years, it is in the recent years that this practice is gaining popularity.

Approximately 20% of the current insurance providers do consider credit score prior to issuance of a policy, as estimated by Godin.

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