Watchdog hits insurers on credit snooping

VICTIMS’ RIGHTS VIOLATED BY PRACTICE OF VIEWING CREDIT RATINGS, PRIVACY CZAR SAYS

An insurance company handling a car-crash victim’s accident claim violated the senior citizen’s privacy rights by accessing his credit rating for no good reason, the federal Privacy Commissioner has ruled.

The Personal Insurance Company argued it needs such information to help weed out fraudulent claims, but the privacy watchdog said there was little evidence that examining clients’ credit worthiness helps counter insurance cheating.

The decision this month dealt a blow to what appears to be a common industry practice.

In fact, fraud likely has little to do with why insurers seek access to credit scores, charged advocate Rhona DesRoches, who heads the Association of Victims for Accident Insurance Reform.

She suggested that companies want instead to gauge the claimant’s financial status to help determine how little they can get away with paying out.

“This is very worrisome,” DesRoches said. “Just knowing how much debt a person carries might be an indicator of what that breaking point is … If they know a person is in dire financial straits, then they know how far along that person might go before giving in to perhaps a lower settlement than they should.”

In response to the privacy commissioner’s investigation, The Personal has agreed to stop using credit scores to assess auto claims by April 22, the agency said in its decision.

The Mississauga, Ont.-based firm has also promised to review other ways it employs credit information. Ontario law bars companies from using credit ratings to help set insurance premiums, but doesn’t address other possible applications.

Joe Daly, a spokesman for The Personal, said the company accepts the report’s recommendations, but will not comment further to protect the customer’s privacy. It’s “absolutely not true” the insurer uses credit data for anything but fighting fraud, he added.

As for the rest of the industry, some companies may use credit information to “identify and detect” fraud, said Steve Kee of the Insurance Bureau of Canada, an industry trade group.

The case centres around Kal Haikola, a retired bank loans manager who was rear-ended by a Cadillac on an east-end Toronto street in November 2012. He suffered whiplash and a jaw injury, eventually obtaining $6,000 from The Personal for health-related expenses.

But just days after the crash, in an “aggressive” interview, he says an adjuster asked for consent to access his credit score. Haikola, 72, said he reluctantly agreed, still shaken up by the accident and eager to expedite the claim, but increasingly perturbed by the request. He eventually complained to the Privacy Commissioner.

The company told the commissioner’s office that it uses credit scores as one of many variables to detect fraud and to “triage” claims as they come in. By filtering out suspicious ones for further investigation, others cases are processed more rapidly and premiums kept lower, it argued.

The firm said it introduced the measure in 2012 because of high rates of auto-insurance scamming, fuelled by the growing trend of staged accidents and fraudulent suppliers, the firm said.

But despite providing statistics to back up its argument, The Personal “failed to demonstrate that the collection and use of credit scores is necessary and effective in preventing and detecting fraud,” said the agency.

The Personal also did not obtain “meaningful” consent from Haikola, and is generally not open about its use of credit information in the claims process, said the commissioner. Haikola suggested the practice is “rampant,” saying private investigators hired by another firm obtained his credit score after a crash in the late 1980s, and he’s heard similar stories from a neighbour who had an accident recently, and another from a patient at his rehabilitation clinic.

He echoed DesRoches’ allegation that companies probably use credit information to “low-ball” accident payouts. “It’s discrimination against the poor,” said Haikola. “If you were struggling, and for some reason you became unemployed and your unemployment benefits are about to run out, you’d say … ‘I’ll take anything.’ ”

A southern Ontario woman who was knocked unconscious and suffered brain damage in a 2012 collision on a wintery highway — leaving her needing glasses and special hearing aids — says an adjuster asked her days after the crash for consent to get credit information. She interpreted the request as a suggestion her claim was bogus.

“I said, ‘You think I did this because I need money?’ I had over $200,000 in the bank,” said the woman, who asked not to be named.

“Why the hell would I need a car accident to get money?”