Halifax, Nova Scotia — Nova Scotia’s insurance regulator has approved RSA Canada’s introduction of a Quality Rating Factor (QRF), which uses credit scoring for rating auto insurance.
RSA Canada’s proposed QRF will only apply to writing new auto business, not existing business. The board noted that it has already approved the use of the QRF by Unifund Assurance Company, an RSA subsidiary company, earlier this year; again, for new business, not existing business.
Discounts offered by RSA and Unifund based on the QRF will differ, the board observed.
“RSA’s proposal is similar to Unifund’s,” states the board’s decision, released Mar. 11, 2021. “However, despite the similarities in the rating variables, the discounts offered by Unifund and the proposed discounts for RSA clients differ. The selected discounts reflect differences in the chosen distribution networks and business strategies used by each company.”
The use of credit scores to rate auto insurance is a controversial topic as of late. Insurers cite evidence that high credit scores correlate with better auto insurance risk and fewer claims, but brokers have concerns about the transparency with which insurers are using the credit scores.
In green-lighting the use of auto insurance credit scoring by RSA, the Nova Scotia Utility and Review Board raised an issue with how companies intend to follow the Insurance Bureau of Canada’s voluntary Code of Conduct for Insurers’ Use of Credit Information.
The board stressed companies must ensure that the consent they receive from their clients to use credit scoring is specific and that a record of that consent must be retained, as per the IBC’s code.
In February, the board approved The Co-operators’ use of an insurance score that includes a credit score component. In its application to use the QRF, RSA observed that it did not want to be at a competitive disadvantage with other companies in the province approved for credit-scoring use.