On May 27, federal Minister of Finance, Jim Flaherty, confirmed what he had already announced in October: banks will not have the right to sell or promote insurance products on their web sites.In a letter sent to the Canadian Bankers Association, the Insurance Brokers Association of Canada (IBAC), and to the Trust Companies Association of Canada, Mr. Flaherty explained that he was tightening up Canadian regulations to forbid banks from selling or promoting personal and general insurance on their web sites.

However, two exceptions have been accorded to the banks. They will still be allowed to promote their creditor insurance and travel insurance products on their web sites. But the banks will not be permitted to post links pointing to pages that offer their subsidiary insurers' products. Only links that point to credit and travel insurance will be accepted.

Consultation period

Nevertheless, banks will be able to build a "corporate web page" with links to their various banking and insurance subsidiaries, as long as there is no promotion of financial products. Minister Flaherty defines a corporate web page as being a site that "describes a bank's corporate structure and business lines." The ministry must now pass the regulations. A draft will be published shortly and a consultation period will follow.

Mr. Flaherty's announcement was welcomed by IBAC. The Insurance and Investment Journal contacted Steve Masnyk, IBAC's director of public affairs, for his comments. "It was what we have been expecting. It's a good decision on the part of the Minister, and it will protect the interests of Canadian consumers," he says.

He adds that the minister, in making his decision, recognized the legitimacy of the rules prescribed in 1991-1992, which forbade banks from selling insurance in their branches. "At that time, we did not foresee that insurance transactions could be conducted over the Internet. The Minister's decision has closed this loophole," says Mr. Masnyk.

Wait and see

He adds that his organization is now waiting to see and comment on the written version of the regulations. He expects the consultation to be wrapped up quickly, since the ministry has already done much of the groundwork on this subject.

For its part, the Canadian Bankers Association confirmed that its members would abide by the new regulations. "We have always maintained that choice and competition in the insurance market was in consumers' interest. We are therefore concerned when restrictions are placed on choice and competition, and negatively affect this interest. That said, Canadian banks will obviously fully comply with all aspects of the country's insurance regulation. Each bank will conduct a review of the new rules in order to determine how its online activities will be affected and what measures need to be taken in order to comply with the regulations."

The Insurance and Investment Journal also contacted the Royal Bank of Canada (RBC), which has always been strongly opposed to the federal project. Jim Westlake, RBC Group Head of International Banking and Insurance says that he is disappointed by the decision. "It's a happy day for insurance brokers in Canada, but a sad one for consumers. Canada is now the only country that does not allow banks to promote their insurance products directly. It is also the only country to try to regulate web links. However, it is not something that will affect our profits. Nevertheless, we find it odd to see that the rules prescribed by the minister go above those made for bank branches. We will now have to work to understand it all," he says.