Alberta takes on the big banks

(May 25, 2005) The Alberta Insurance Council is prepared to go to the country’s highest court to defend its position that anyone selling insurance products should be licensed by the province.

The case involves group insurance and dates back to 2001, when Alberta’s Insurance Act was re-written to amend the definition of an insurance agent to include anyone who enrols individuals in prescribed contracts of group insurance.

Prior to that, that activity did not fall under the definition of an insurance agent, says Joanne Abram, CEO at the Alberta Insurance Council.

Within days of that amendment, eight Canadian banks (Canadian Western Bank, BMO, CIBC, HSBC, National Bank, RBC, Scotiabank and TD) filed a constitutional challenge, arguing that since banks are regulated federally, they should not be subject to provincial regulation.

The banks lost the case and a subsequent appeal, which came down earlier this year. “The judge found that the legislation in the Insurance Act did not infringe on federal jurisdiction,” says Abram.

“The banks involved have applied for leave to appeal to the Supreme Court of Canada,” she adds. “But we do not know at this time whether or not that has or will be granted.”

The insurance council had intervenor status in the Alberta cases, and will do so again, should the case reach the high court. “We feel it is extremely important for our stakeholders that we ensure that anyone who is involved in the distribution of insurance products has to meet a particular standard and that there should not be exemptions,” Abram insists.

And although the case deals specifically with group insurance, it naturally leads to the larger question of whether banks should be allowed to sell any insurance products in branches.

“It’s crucial,” says Abram. “The Bank Act dictates what the banks can do. But if the act is amended and banks are given additional insurance retailing powers, it’s important that the precedent be set that distribution be governed at the provincial level and they will be subject to the same requirements as other provincial distributors.”

“If banks sell insurance, the people in the branches should be properly licensed.”

At its recent board meeting in Halifax, Advocis members approved a resolution that it will also apply for intervenor status in the case. Advocis says all employees and agents of deposit-taking institutions selling insurance to the public should be licensed by provincial regulators, placing all advisors distributing insurance on equal footing. “We think anyone who is selling insurance should be licensed,” said Advocis board member Dennis Caponi at the conference.

The Canadian Life and Health Industry Association have also been intervenors in the case from the beginning, Abram says, adding she assumes they will continue, if the case reaches the high court.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com