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Setting a New Score: Co-operators approved to offer credit score-based rating

Toronto, Ontario – Nova Scotians with good credit are in for a treat if they drive under Co-operators General Insurance, now that the company has announced that credit scores can now be used as a rating factor for auto insurance, following the regulator’s approval.

“The company proposed a new rating variable, Insurance Score, based on credit information obtained with the client’s consent,” according to a press release from the Nova Scotia Utility and Review Board from Feb. 5. 

“Co-operators proposed differentials for this variable that would apply to bodily injury, property damage-tort, direct compensation property damage (DCPD), accident benefits, collision, comprehensive, and specified perils. Co-operators off-balanced the expected impact of the proposed rating variable to make it revenue neutral.”

The “off-balancing” is expected to create “significant increases to base rates for some coverages”, according to the press release.

“This is similar to other cases where the use of credit information has been allowed and, although it tends to shift premiums from clients with the better credit ratings to clients with poorer ones, this is a result of an actuarial analysis that showed credit ratings can have a significant impact on Co-operators’ loss costs,” said the Nova Scotia regulator in a written statement.

According to the regulators, this move from Co-operators is likely a symptom of increasing competition in the credit-based insurance market.

“Co-operators…noted several competitors had introduced credit information in their rating algorithms and said it wanted to avoid being put at a competitive disadvantage,” according to regulators.

“The company said individuals with poorer credit might decide to insure with Co-operators, while better credit risks, who should have lower claims experience, might seek out insurers who use credit information to offer discounts. Co-operators said if it attracted more of the poorer risks, its claims experience could deteriorate.”

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