Insurance sales at Ontario CUs targeted

Unlike financial services co-operatives in some other provinces, CUs in Ontario are prohibited from selling “unauthorized” insurance products through their branch networks. These unauthorized products generally include home, auto, life and health insurance but not insurance tied to credit products, such as mortgage or credit card insurance, or certain group insurance products.

However, current regulations do appear to allow Ontario CUs to market and promote a wide variety of insurance products on their websites — a point that the IBAO concedes.

The IBAO, which represents P&C insurers in Ontario, has been asking the provincial government for quite some time to change the rules governing CUs and the sale of insurance products. The IBAO wants the rules to align more closely with the federal Bank Act, which prevents banks from marketing and selling unauthorized insurance through both their branch networks and their websites.

Asks Chris Floyd, the IBAO’s president-elect: “If credit unions are not allowed to sell [P&C insurance] from a physical branch, then why should they be allowed to sell or advertise it from their website?”

Companies in Canada’s insurance sector have argued that allowing credit-granting institutions such as banks and CUs to promote and sell unauthorized insurance products through branches is contrary to the public interest because of the opportunity for “tied selling” and the possibility of conflicts of interest, among other reasons.

In 2011, the insurance sector was successful in persuading the federal minister of finance to prohibit banks from marketing or selling insurance products on their main banking websites, representing a big policy win for insurance brokers.

In turn, insurance brokers in Ontario see no reason why those same rules shouldn’t apply to CUs in the province.

“It’s just a matter of aligning the Credit Union and Caisse Populaire Act with the Bank Act,” Floyd says.

Central 1 Credit Union, the association representing CUs in Ontario and British Columbia, sees nothing wrong with its member CUs promoting insurance products through links on their websites to third-party providers.

“Credit unions are following the rules as they exist now,” says Art Chamberlain, the media relations manager at Vancouver-based Central 1. “We don’t think we should have to follow the tighter restrictions that apply to the big banks.”

Whereas the federal government may have been concerned about the size of the banks and their ability to apply tied-selling pressure on clients, Chamberlain argues, CUs are significantly smaller players.

In addition, he says, the relationship between third-party insurance providers and CUs is more arm’s length in nature rather than the close relationship that exists between a bank and its insurance subsidiary.

“The rules that are in place at the federal level,” Chamberlain says, “are there to police relationships [between banks and their insurance provider partners] that don’t exist at the provincial [CU] level.”

Wynne’s announcement about a review of the rules came as a surprise, Chamberlain says, although Central 1 was aware that insurance brokers had been raising the issue of CUs and insurance sales with the Ontario government for some time. Central 1 has been in contact with Ontario’s provincial government regarding Wynne’s comment, but has not received any further information so far.

“We don’t know what exactly [the government] is going to be reviewing,” Chamberlain says, “what their terms of reference are, what they’re looking at, how they’re going to handle it, the timing or any of that.”

Requests made by Investment Executive for more information from both the premier’s office and the Toronto-based Financial Services Commission of Ontario, which regulates CUs in the province, were redirected to the Ontario Ministry of Finance. At press time, Finance Ontario was unable to provide any further information regarding the review.

Although the push to examine the issue of CUs and insurance sales is coming from the province’s P&C insurers, the Toronto-based Canadian Life and Health Insurance Association Inc. (CLHIA), the group that represents the life and health insurance sector nationally, appears to support the proposed review — in concept, at least.

“The proposal seems to have the goal of making the Ontario regulations the same as in recent changes that were made to the federal legislation,” wrote Wendy Hope, vice president of external relations with CLHIA in an email to Investment Executive. “In general, [the] CLHIA believes that harmonization is always a useful
objective.” IE