Two of Canada’s big five banks are beefing up their insurance operations with the addition of more retail branches.

Mississauga, Ont.-based RBC Life Insurance Co. and Toronto-based Scotia Life Insurance Co. , the life insurance arms of Royal Bank of Canada and Bank of Nova Scotia, respectively, have both announced the opening of dozens of new branches in the coming year.

RBC Life plans on expanding its national footprint of 53 insurance branches across Canada with 47 more branches located near its regular bank branches in the next few years.

Meanwhile, Scotia Life, which has two retail locations in Ontario, will open two more branches in 2012, with one of those most likely to be in Ontario.

“These moves continue to show that the banks are in the insurance business,” says Byren Innes, senior vice president and director with Toronto-based NewLink Group Inc., “and they are getting into it in a bigger and bigger way over time.”

Having more retail branches will allow the banks to capitalize on their brands and grow client awareness that they are playing in the insurance market, adds Innes: “It’s more likely a client will think of getting an update on their home or auto insurance once they spot an insurance branch with a recognizable brand than they would have if they hadn’t seen one.”

Physical branches also welcome clients to the idea of purchasing insurance products in a way that a direct channel, such as the web, cannot.

About half of the transactions RBC Life processes are from first-time insurance clients, says Neil Skelding, president and CEO of RBC Life’s parent firm, RBC Insurance Services Inc. : “Clients get a certain utility out of walking into a branch. The amount of growth of first-time insurance business we see is why we have decided to expand our national footprint.”

After taking the past two years to perfect the sales routines and client experience at RBC Life’s existing locations — 37 branches in Ontario, seven in Quebec, four in Alberta, three in New Brunswick and two in Nova Scotia — the new locations will simply add presence across those markets, depending on which retail spaces open up near existing RBC branches.

For the nine months ended July 31, RBC Insurance earned $435 million in net income vs $378 million in the corresponding period a year earlier. Skelding says the introduction of Ontario automobile insurance reforms, as well as increasing the line of products, were responsible for the growth.

Unlike RBC Life’s aggressive, nationwide expansion, Scotia Life’s expansion plans are more localized and conservative, says Mark Cummings, senior vice president and head of insurance in Canada with Scotiabank: “Once we assess how our 2012 openings do, we will take a look at a more national rollout.”

Scotiabank is pleased with the performance of its downtown Toronto location in the Bay Adelaide Centre. Scotia Life will most likely open its two new locations in similarly high-traffic, centralized areas.

“We want to reach a certain demographic,” Cummings says, “and that means waiting for the right retail space to open up.”

The goal of expanding the presence of Scotia Life also is about leveraging the brand as a place for clients to service their other non-banking financial needs, Cummings adds: “We want to leverage our centres as a platform to offer additional insurance and non-banking financial products down the road.”

These other non-banking products could include wealth-management products such as segregated funds.

As for the fears that RBC Life’s expanding retail presence could lead to channel conflict with its independent sales force — which includes financial advisors selling RBC products outside of retail branches — Skelding says: “We are expanding the independent market, not competing with it.”

The typical RBC Life client who buys a life insurance policy through a branch for the first time buys only about $50,000 worth of coverage. “That’s not the type of business an independent agent is interested in [doing],” adds Skelding. That same client, he says, will most likely seek advice from an independent agent later on.

Although RBC and Scotiabank have found that a physical presence is one of the most effective ways to grow in the insurance business, other players disagree.

Says Sampson Yuen, communications associate with Toronto-Dominion Bank on behalf of TD Insurance Co. : “We have found that our customers find our existing [online and telephone] channels the most convenient.” IE