Canadians bankers are taking exception to efforts by the country’s Finance Minister, Jim Flaherty, to alter the rules under which they sell insurance. After Flaherty sent a letter to banks suggesting stopping advertising insurance services online, the Canadian Bankers Association (CBA) issued a prompt rebuttal.
“We are completely shocked that Mr. Flaherty would want to limit how and where consumers can access information about insurance,” the CBA statement reads. “Further, Mr. Flaherty has taken this step without any public consultations with Canadians or the banking industry.”
The bankers note the country’s Bank Act permits them to offer a full range of insurance products through insurance company subsidiaries. While bank remains a relatively small distribution channel in the U.S. the concept is well entrenched in Europe and Canadian banks have been able to sell insurance since 1992.
In their statement, the bankers charged that pressure from insurance brokers prompted Flaherty to call for a modification of the rules regarding online sales, contrary to a ruling from the Office of the Superintendent of Financial Institutions (OSFI).
“In June, OSFI looked at this and issued a ruling saying that a bank Web site is not a bank branch and that banks are in compliance with the Bank Act when they promote insurance products on their Web sites. We heard no concerns from the government when OSFI issued its ruling, but it’s clear that the Insurance Brokers Association of Canada (IBAC) has been lobbying to have this ruling overturned.”
Indeed, the IBAC has long sought to limit insurance sales by banks. In a 2005 letter to the Department of Finance, the association charged that since insurance brokers must routinely provide banks with “proof of insurance coverage” on their customers to whom the bank has lent money, brokers operate at an inherent disadvantage.
“In spite of any best efforts to compete, the fact remains that chartered banks possess a competitive advantage over insurance brokerages because of their much larger size, and the abundance of consumer information at their disposal,” the IBAC wrote. “They would have access to millions of customer files that could then be used to cross-market insurance products.”
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