Expand insurance options in banks, says CBA head

(June 22, 2005) The president of the Canadian Bankers Association says consumers should be able to get insurance referrals and product information in bank branches. Ray Protti says the current insurance restrictions on banks don’t make sense and should be changed.

“Consumers should be able to get the insurance information they need when and where they want it,” Protti said in a speech this morning in Toronto. “It’s time to make this happen.”

“The fact is, banks are already in the insurance business and have been for some time,” he added, noting that consumer can get creditor, mortgage and travel insurance at branches. “But you cannot get the full range of product information at your branch nor can you have branch staff refer you to a qualified professional.”

“Not only is a bank a logical and convenient place to get information, it serves a segment of the population which often has limited options,” Protti said. “Banks reach a household segment that tends not to be covered by other financial professionals.”

Protti calls the Canadian restrictions “an anomaly,” noting that virtually every developed country in the world permits banks to provide information about insurance and to network insurance products. “Interestingly, all three of the largest Canadian life insurance companies make use of bank channels in the U.S. to serve their customers.”

The CBA is proposing four changes to the federal Bank Act. The first two would allow branch staffers to refer clients to an insurance professional working outside the branch. “This could mean obtaining the contact information for a bank-owned agency down the street, the number for a call centre, or the contact information of an independent agency or third-party insurance corporation with which the bank has a relationship,” Protti explained.

The other amendments would allow banks to send insurance information to customers on request, and to offer insurance brochures in branches.

The association also commissioned a poll which suggests widespread support for more insurance information in banks. Ninety percent of Canadians surveyed by The Strategic Counsel agreed that it’s important to have as many choices as possible when it comes to information about insurance products in Canada, including bank branches. And 82% agreed that “the convenience of being able to get information from a variety of sources including my bank branch is important to me.”

In addition, 88% of those surveyed said that should be able to get a referral to a qualified insurance professional through bank branch staffers.

Although Protti did not suggest in his speech that insurance agents be permitted to operate in bank branches, the issue of referrals and product information is sure to stir up more controversy at the provincial level. In Alberta, two courts have upheld the province’s right to license insurance agents in a case involving the sale of creditor insurance in banks. The Canadian Bankers Association has sought leave to appeal that ruling with the Supreme Court of Canada.

“If the Bank Act is amended and banks are given additional insurance retailing powers, it’s important the precedent be set that distribution be governed at the provincial level,” says Joanne Abram, CEO of the Alberta Insurance Council.

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