As part of our federal election coverage, Investment Executive explores the positions of the major federal political parties on the top issues affecting the financial services industry.

Here we look at where the parties stand in on allowing banks to sell insurance in their branches:

Whatever the outcome of the Jan 23 federal election, Canada’s banks are unlikely to get a bigger slice of the insurance industry pie.

Neither the Liberals nor the Conservatives intend to amend the federal Bank Act to allow banks to sell anything but credit-related insurance in their branches. The New Democratic party has no position on the issue, says Ottawa-based NDP press secretary Ian Capstick, but will turn its attention to the matter after the election,

The act now only permits banks to sell insurance products through the mail and Internet, their subsidiaries, and insurance-licensed securities advisors. It’s due for review this year.

“We will not be making changes to the status quo,” says a Conservative party spokesperson.

CBA president and CEP Ray Protti labeled the restrictions “anti-consumer” in an August 2005 speech. His comments accompanied release of a discussion paper proposing Bank Act amendments to allow bank branch employees to disseminate insurance information, gather data from clients (with their consent) and refer clients to insurance professionals. Ottawa-based Liberal spokeswoman Amy Butcher says the party does not support such changes.

The push for amendments is coming from the banks, not the insurance industry, says Sara Gelgor, Toronto-based vice president of regulatory affairs at Advocis. Insurance advisor organizations have concerns against the banks moving further into the insurance business.

Gelgor says, “consumer protection is paramount.” Advocis is concerned about “tied-selling” of bank and insurance products, and the potentially adverse impact of co-mingling personal health and financial information.

Front-line bank employees in a position to disseminate or collect information would have to be licensed and regulated properly, says Susan Allemang, head of regulatory affairs for the Independent Financial Brokers of Canada, based in Mississauga, Ont. Provincial insurance regulators now undertake that function, while the federal government regulates the banks. As a result, the Bank Act does not deal with regulating insurance sales and marketing.

Credit unions are arguing that they — as opposed to the banks — should be allowed to provide insurance products in small, under-serviced, communities.

However, these areas are not suffering, contends Allemang. “Many independent financial advisors live and work in these communities,” she says.

In a recent IFB survey, she says, 80% of respondents disagreed that small communities were underserved. “And 30% of them said this market makes up 50% of their client base.