The Department of Finance is proposing new restrictions on the promotion of insurance on bank and trust company websites.
The new regime would prohibit the promotion of, or links to, non-authorized insurance (such as life insurance and property & casualty insurance) from all banking web pages.
The proposed regulations would allow a “corporate web page” of a bank, that explains a firm’s corporate structure, but where no financial products are promoted, to display links to insurance subsidiaries dealing in these sorts of non-authorized insurance.
“We intend to prevent banks from using their web pages to promote non-authorized insurance products, which is not permitted in their branches,” Finance Minister Jim Flaherty said Thursday.
“These measures were made necessary by the evolving use of technology by banks,” he added.
In letters to the heads of the Canadian Bankers Association, the Insurance Brokers Association of Canada, and the Trust Companies Association of Canada, Flaherty outlined the proposed regime that would apply to the promotion of insurance on the web pages of banks and federally regulated trust and loan companies.
In those letters, Flaherty indicates that he has conducted “broad consultations” on the issue, and that draft regulations will be open to comment as part of the normal regulatory process.
The Insurance Brokers Association of Canada (IBAC) applauded the government’s proposals on banks and insurance
“We’re pleased that the government is modernizing the rules which are currently silent on the question of the web,” noted Steve Masnyk, manager, public affairs at the IBAC. “The web is an extension of the branch and the same rules should apply.”
“Consumers are even more protected from coercion and undue pressure from banks following the government’s decision,” he adds. “Banks are not interested in competing, they’re interested in having an unfair advantage. This decision is the right one for consumers.”
The Canadian Bankers Assocation expressed concern over the proposed restrictions.
“Our position has always been that consumers benefit when there is choice and competition in the insurance market, and we are concerned when restrictions on that choice and competition harm consumers’ interests,” said the CBA in response to the new regime.
“That said, clearly banks in Canada comply with all aspects of the government’s insurance regulations. Individual banks will be reviewing these new rules to determine how they will affect their own online operations and what they need to do to comply with the rules,” it added.
• Feds muzzle banks’ insurance sales
Byren Innes, senior vice president and partner at NewLink Group Inc., a Toronto-based consultant to the insurance industry, discusses the federal government’s recent ruling to prevent banks from selling life and health insurance directly from their websites. He spoke with Gavin Adamson of Investment Executive at the TMX Broadcast Centre.WATCH
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