Prohibition on Banks selling insurance on websites to acquire force of law
New amendments to the Bank Act prohibit banks from promoting or selling unauthorized insurance products on their web pages. The Office of the Superintendent of Financial Institutions will enforce the regulation.
Ted Menzies, federal Minister of State (Finance), announced this decision on Tuesday. “We want to ensure the Bank Act reflects the new reality of online banking, to avoid attempts by banks to do on their web sites what they are prohibited from doing at their branches. We must make sure there is a level playing field where small businesses can compete, thrive and create jobs, which is why our government announced that we would, at the earliest opportunity, ensure that banks are legally prohibited from selling and promoting unauthorized insurance products on their banking web pages,” Minister Menzies said.
In addition to the Bank Act, four other Canadian laws were amended, including the Insurance BusinessRegulations. “These regulations strike a balance between limiting the types of insurance banks are allowed to sell and promote on their web pages and providing consumers choice and transparency in their dealings with financial product providers. This will ensure fair competition and allow Canadians to make the best choice when buying insurance products such as life and health insurance,” Mr. Menzies added.
Brokers lauded this announcement. Dan Danyluk, chief executive officer of The Insurance Brokers Association of Canada (IBAC) confirms that this regulation is a logical response to a changing market, where a growing number of financial transactions are done on the Internet.
“We support the concept espoused by the Minister in October 2009 where he said that banks should not do indirectly what they are prohibited from doing directly. These on-line rules clearly move in entrenching this principle as the law of the land,” he said.
Stéphan Bernatchez, president of the Regroupement des cabinets de courtage d’assurance du Québec (RCCAQ), told The Insurance and Investment Journal that the Department’s decision strengthens the spirit of the law.
“Banks can no longer promote their insurance products on the same sites where they offer bank products. It was indecent to let them do so. It didn't give consumers a real choice. One could easily assume that there would be undue pressure when a customer applies for credit or a bank loan. It's now clear that they can't do this anymore, and consumers are very well served as a result,” he says.
The Canadian Bankers Association is singing a different tune. In an e-mail sent to The Insurance and Investment Journal, the organization pointed out that banks will comply with the new regulation, as they have done with every government requirement. However, the association argues that competition and choice in the insurance market are a benefit to consumers, which is why they should not be limited.
“We're living in the electronic era. Consumers do their research and shop online for a large variety of products and services, including financial products.
The Internet is a practical means of obtaining information and comparing offers, with no obligation to buy anything. Imposing artificial and inconvenient barriers is not in consumers’ best interest, the association maintains.