Bank executive blasts insurance prohibitions

RBC’s chief operating officer says Ottawa should ease the “bizarre” rules that forbid Canadian banks from selling insurance in branches. In a speech on Monday in Montreal, Barbara Stymiest, the former head of the TSX, called the regulations unreasonable and not in the best interests of clients.

“This is not about better service and it is not about protecting privacy,” she insisted. “These are red herrings. This is about losing sight of the financial services client of today.”

RBC has tried to skirt the rules by opening insurance outlets beside branches. “For example, there is one beside a branch in Scarborough, in Toronto, which does a brisk trade,” Stymiest noted. “We have just recently opened a retail insurance office in Montreal.”

“But if I was a teller and you came to my wicket at the neighbouring bank branch and asked me about insurance by rule, by law, there is nothing I am allowed to say to you.”

“I can’t give you a brochure. I can’t point to the building next door. There is no-one to whom I am allowed to refer you. I have to be what I know you don’t want me to be when it comes to your questions.”

Stymiest said Quebec provides a good example of why Ottawa should amend the Bank Act, which is up for renewal this year, since caisse populaires have been selling insurance since 1987. “You can get information and advice in the branch. You can expect a sensible referral to a broker. In fact, they might even have a broker sitting there in the branch. How convenient is that?”

Allowing caisses to get into the selling of insurance was forecast to be a body blow for the insurance industry, she added. “Yet nearly 20 years later insurance ownership in Quebec is greater than in Canada as a whole, especially among low-income groups who have access to coverage at arguably lower costs than that offered by traditional carriers.”

“And the number of insurance sale agents? It has not declined. It has increased inside a very interesting shift between the agents tied to a specific company and those who operate independently across the province. There has been a huge shift to independent status, likely in accommodation of change.”

Advocis, the country’s largest association of financial advisors, has campaigned vigorously to maintain the status quo.

In February, Advocis commissioned a poll, which suggested that 78% of Canadians believe that the current prohibition on banks providing information about life and health insurance, or referring customers to insurance companies, should be kept in place. More than 90% of consumers participating in the Pollara survey also said they believe that the banks already have enough personal information on them.

“The suggestion apparently is someone someplace else should have more,” Stymiest says. “And this is offered in defence of personal privacy.”

“These obviously aren’t the same people who are buying RBC mortgage insurance to protect their homes. And they aren’t the same people buying our travel insurance. They must be the same people who didn’t want banks and securities brokers to merge back in the late 80s. I have been wondering where those people got to after all this time.”

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