Insurance prohibitions against banks called

By Kate McCaffery | May 9, 2006 | Last updated on May 9, 2006

3 min read

Give banks permission to provide insurance product information in branch.
Allow banks to solicit client permission to have tailored insurance product information sent to them.
Allow banks to provide referrals to qualified insurance professionals outside of the branch.
Allow banks to forward relevant client information to insurance affiliates, with the client’s permission, to make it easier for banks to tailor their response to the client’s insurance need.

Despite insurance industry arguments to the contrary, Protti says the consumer would remain in complete control of this process. And he insists banks have no interest in actually selling insurance in branches,” he says. “We know that this government has made clear that it is opposed to changing rules around bank insurance sales. That is not what we are proposing.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com

(05/09/06)

Kate McCaffery

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Give banks permission to provide insurance product information in branch.
Allow banks to solicit client permission to have tailored insurance product information sent to them.
Allow banks to provide referrals to qualified insurance professionals outside of the branch.
Allow banks to forward relevant client information to insurance affiliates, with the client’s permission, to make it easier for banks to tailor their response to the client’s insurance need.

Despite insurance industry arguments to the contrary, Protti says the consumer would remain in complete control of this process. And he insists banks have no interest in actually selling insurance in branches,” he says. “We know that this government has made clear that it is opposed to changing rules around bank insurance sales. That is not what we are proposing.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com

(05/09/06)

The debate over the rules that govern bank involvement in life insurance sales got a fresh infusion of rhetoric on Tuesday from Ray Protti, president of the Canadian Bankers Association.

Although Protti covered little new ground in his speech to the National Press Club of Canada and the Economic Club in Ottawa, his comments and proposals clearly spelled out the banking industry’s position on the matter.

After applauding the new government for mentioning its commitment to the Bank Act review in recent budget and throne Speeches (the review is mandatory — the federal government has until October 24 to deliver it or extend existing legislation for up to six months while parliamentary committees work on the file), Protti repeated the banking industry’s position that prohibiting insurance-related information in branches is restrictive and not in the consumer’s best interests.

“These prohibitions have been in place for decades. They have never made sense and they don’t make sense now, particularly for consumers who are trying to navigate the complicated and confusing insurance marketplace,” he said. “The interests of the consumer have been lost in what has turned into an ‘insurer vs. bank’ debate.”

The CBA president makes several good points — a more open insurance system in Quebec where customers can obtain insurance information in credit unions actually resulted in an expansion in the industry and a larger customer base for insurance products; institutions like Loblaws and Costco providing insurance advice makes rules that prohibit banks from providing the same seem absurd; and banks reach a large number of households that are not currently being served by any other financial professionals.

However, Protti’s speech also contained several arguments that could easily be perceived by critics as pandering and overly simplistic.

He says concerns about privacy and coercive tied selling are adequately addressed by current Bank Act provisions, PIPEDA and oversight and enforcement provided by the Financial Consumer Agency of Canada. Although these provisions exist, industry watchers say they do not adequately address preferred pricing arrangements, softer, more legal forms of coercion and tied selling, the client-creditor relationship and situations where customers may unwittingly agree or give permission for the bank to share information with other departments.

“The banks say all they want to do is inform consumers. But what they’re calling for is more access to the consumer’s personal information so they can market more of their products,” says Advocis chair, Gary McLeod in response to Protti’s speech. “The current protections were put in place to ensure consumers’ interests come first. Why would anyone want to change that?”

Protti and the CBA are recommending four changes to the Bank Act that would:

Give banks permission to provide insurance product information in branch.
Allow banks to solicit client permission to have tailored insurance product information sent to them.
Allow banks to provide referrals to qualified insurance professionals outside of the branch.
Allow banks to forward relevant client information to insurance affiliates, with the client’s permission, to make it easier for banks to tailor their response to the client’s insurance need.

Despite insurance industry arguments to the contrary, Protti says the consumer would remain in complete control of this process. And he insists banks have no interest in actually selling insurance in branches,” he says. “We know that this government has made clear that it is opposed to changing rules around bank insurance sales. That is not what we are proposing.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com

(05/09/06)

The debate over the rules that govern bank involvement in life insurance sales got a fresh infusion of rhetoric on Tuesday from Ray Protti, president of the Canadian Bankers Association.

Although Protti covered little new ground in his speech to the National Press Club of Canada and the Economic Club in Ottawa, his comments and proposals clearly spelled out the banking industry’s position on the matter.

After applauding the new government for mentioning its commitment to the Bank Act review in recent budget and throne Speeches (the review is mandatory — the federal government has until October 24 to deliver it or extend existing legislation for up to six months while parliamentary committees work on the file), Protti repeated the banking industry’s position that prohibiting insurance-related information in branches is restrictive and not in the consumer’s best interests.

“These prohibitions have been in place for decades. They have never made sense and they don’t make sense now, particularly for consumers who are trying to navigate the complicated and confusing insurance marketplace,” he said. “The interests of the consumer have been lost in what has turned into an ‘insurer vs. bank’ debate.”

The CBA president makes several good points — a more open insurance system in Quebec where customers can obtain insurance information in credit unions actually resulted in an expansion in the industry and a larger customer base for insurance products; institutions like Loblaws and Costco providing insurance advice makes rules that prohibit banks from providing the same seem absurd; and banks reach a large number of households that are not currently being served by any other financial professionals.

However, Protti’s speech also contained several arguments that could easily be perceived by critics as pandering and overly simplistic.

He says concerns about privacy and coercive tied selling are adequately addressed by current Bank Act provisions, PIPEDA and oversight and enforcement provided by the Financial Consumer Agency of Canada. Although these provisions exist, industry watchers say they do not adequately address preferred pricing arrangements, softer, more legal forms of coercion and tied selling, the client-creditor relationship and situations where customers may unwittingly agree or give permission for the bank to share information with other departments.

“The banks say all they want to do is inform consumers. But what they’re calling for is more access to the consumer’s personal information so they can market more of their products,” says Advocis chair, Gary McLeod in response to Protti’s speech. “The current protections were put in place to ensure consumers’ interests come first. Why would anyone want to change that?”

Protti and the CBA are recommending four changes to the Bank Act that would:

Give banks permission to provide insurance product information in branch.
Allow banks to solicit client permission to have tailored insurance product information sent to them.
Allow banks to provide referrals to qualified insurance professionals outside of the branch.
Allow banks to forward relevant client information to insurance affiliates, with the client’s permission, to make it easier for banks to tailor their response to the client’s insurance need.

Despite insurance industry arguments to the contrary, Protti says the consumer would remain in complete control of this process. And he insists banks have no interest in actually selling insurance in branches,” he says. “We know that this government has made clear that it is opposed to changing rules around bank insurance sales. That is not what we are proposing.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com

(05/09/06)

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