In recent years, Canadians have become increasingly interested in their credit scores and how good (or poor) credit can affect their ability to get funding for life’s major purchases, such as mortgages and vehicle loans. But did you know that your credit score can also be used by insurance companies to determine how much they’ll charge you for their products? In Canada, whether an insurer can access your credit score and for which types of insurance varies by province, so let’s take a look at where, why and how your credit score will play a role in determining your auto insurance rate.
Will your credit score affect your auto insurance rate?
The short answer is no. If you’re an Ontario resident with a poor credit score, it won’t affect the affordability of purchasing auto insurance. In Ontario, auto insurance providers are not allowed to access your credit score to determine your insurance premiums. However, insurers may access your credit score to calculate your home insurance premiums.
Why do some insurance companies use credit scores to determine rates?
insurers in Ontario may use credit score information when underwriting a home insurance policy because they believe there is an association between a client with good credit and other attributes that reduce the risk of making a claim, such as keeping up with home maintenance and repair projects. Insurers in provinces that allow credit checks for underwriting auto insurance policies use credit scores to determine rates in a similar way. Many insurance providers claim correlations between good credit, well-maintained vehicles and even safer driving.
If you have good credit and your insurance company is able and willing to use credit as a factor in calculating your premiums, you’ll likely receive a reduction in how much you pay for insurance coverage. On the other hand, some insurance stakeholders argue that using credit in this way unfairly makes insurance less affordable for people who are already struggling financially as well as for young people and recent Canadian immigrants.
What part of a credit score are insurers using to determine good credit?
Determining good credit from an insurance provider’s perspective isn’t the same as determining if you’re a good fit for a vehicle loan or mortgage. Insurance companies review a component of your credit score called a “credit-based insurance score.” Credit-based insurance scores are designed to predict how likely you are to file an insurance claim, whereas other credit score measurements are designed to predict the likelihood of a customer defaulting on loan payments.
How do Ontario’s restrictions on the use of credit scores for car insurance compare with other provinces?
When it comes to credit scores and auto insurance rates, Ontario and Newfoundland/Labrador have similar policies. Both provinces have laws designed to prevent insurance companies from using your credit score to determine how much you’ll pay for auto insurance. In Alberta and Quebec, auto insurance providers can only access customer credit scores with their permission. In Nova Scotia and Saskatchewan, there are no regulations keeping insurance companies from reviewing a client’s credit score. The provincially regulated insurance industries of Manitoba and British Columbia also don’t have regulations for how credit scores can be used by auto insurers.
Due to the varying regulations regarding the use of credit scores for calculating auto insurance policy risk across Canada; it’s important to check whether your insurance company has used your credit score to calculate your insurance premiums. As a customer, you have the right to know what personal information an insurance company is using to determine how much you’ll pay for coverage.
We hope this information has helped you better understand another tool that your insurance provider might use to calculate your home or auto premiums. Regardless of whether you have good, average or poor credit, knowing if and how it’s being used by potential insurers can help you make the best insurance decisions for your circumstances and needs.
If you’re looking for a deal on home and auto insurance, we invite you to get started with an online quote. When you purchase home and auto insurance through Hudson’s Bay Financial Services and aha insurance, you’ll be eligible to receive 4,000 Hudson’s Bay Rewards points.1
Learn about home and auto insurance coverage in Ontario, and get started with an online quote or call us at 1 855 242 6822.
1 Each Hudson’s Bay Rewards points offer is limited to one Rewards account per household. Rewards points will be issued within four to six weeks.
When you use a valid Canadian-issued credit card to pay your monthly premiums, you will earn 1,000 Rewards points when you enrol for a $200/month benefit; 2,000 Rewards points for a $250/month benefit; 4,000 Rewards points for a $500 benefit; 6,000 Rewards points for a $750/month benefit and 8,000 Rewards points for a $1,000/month benefit.
Earn up to 8,000 Rewards points on the anniversary date of your policy. Rewards points will not be pro-rated if you cancel before the anniversary date.