It looks like that "army of insurance brokers" might have popped the
champagne cork a bit early:]
Banks buck Flaherty's demand on web insurance
By John Greenwood,
October 7, 2009
Canada’s banks are digging in their heels, serving notice Thursday they will continue to sell insurance products from their websites in defiance of Jim Flaherty, the federal Finance Minister, who has warned them to end the practice.
“Banks pride themselves on being in compliance with the law and we are in compliance with the law,” said Terry Campbell, vice president of policy at the Canadian Bankers Association. “We are in the internet age. Everyone shops on the internet and when you start putting up artificial barriers that just seems to be headed in the wrong direction.”
The comments come a day after Mr. Flaherty told reporters in Ottawa he wants the banks to stop using their websites to market insurance. He said the government plans to bring in changes to the legislation spelling out that position.
Ever since banks were given the green light to own insurance companies back in the 1990s they have been prevented from selling insurance products from their branches as a way to stop potential unfair competition.
Nearly two decades later banks as a group have made few inroads and the insurance industry continues to be dominated by existing players.
But recently the banks have been cranking up the heat as they hunt for profits in a slowing economy, testing the limits of the Bank Act.
In August, Bank of Nova Scotia launched a range of new home, life, auto and health insurance products and announced plans to open a network of insurance branches -- including some right next to its bank branches.
Staff at Royal Bank branches reportedly sport buttons inviting customers to ask about insurance.
In fact banks have been selling insurance online “for years,” said Mr. Campbell. “The internet has been around for a while and this is not a new story so we are scratching our heads a bit [about the timing of Mr. Flaherty’s announcement.]
The banks argue that the Bank Act, which sets rules on how banks operate, prohibits only the use of branches to sell insurance but says nothing about the internet. Therefor the practice should be allowed, they say. But according to Mr. Flaherty, that is not the spirit of the legislation.
“So I have made it clear now that we will change the rules so that the marketing of insurance, via websites and virtual bank branches, will not be permitted,” he said.
Mr. Flaherty Thursday insisted he is not bowing to pressure from insurance brokers. “I’m not caving in to anybody,” he told reporters. “We are trying to do the right thing in line with government policy.”
Only Royal Bank has publicly stated it will not comply with the minister's request but sources said the other banks are taking the same approach.
The Insurance Brokers Association of Canada which represents about 35,000 brokers of property and casualty insurance across the country hailed the government’s stand.
“Even the big banks will have to follow the rule of Parliament,” said Dan Danyluk, the chief executive. Mr. Danyluk called it a victory for consumers that banks will be prevented from selling insurance online. Allowing banks to sell both insurance products and make loans through the same channel leaves consumers vulnerable to unfair marketing practices, he said.
© Copyright (c) National Post
Friday, October 9, 2009
Posted by Fillibluster at 10:46 AM