RBC opens first retail insurance branch

(July 11, 2005) RBC has followed through on a recent pledge to set up retail insurance offices next door to conventional bank branches. RBC Insurance opened its first office at the Woodside Square Mall in Scarborough, Ontario last month.

The move, considered controversial by some industry watchers, is an attempt to bypass current regulations that prevent banks from selling certain insurance products in branches.

The insurance office, which has been open for about two weeks, is staffed by four agents, licensed to sell home, auto and life insurance, says RBC Insurance president Neil Skelding.

“We’re quite encouraged by what we’ve seen so far, but it’s primarily home and auto, less so on the life side,” he said in an interview. “We’re set up to do relatively simple insurance, like term, but anything more complex, like universal life, gets referred out to our career insurance agent operation.”

Skelding says RBC plans to open several more retail offices near bank branches over the next year. “We’re certainly going to expand this type of operation. What we’ve discovered in the short time we’ve been open is that consumers see the value in what we are offering and the convenience of getting face-to-face advice on home and auto and basic life insurance.”

Recently, the Canadian Bankers Association released an extensive report, arguing that the federal Bank Act should be amended to permit branches to offer insurance information in branches and to allow bank staffers to refer clients to an insurance professional working outside the branch.

“It’s a little bit absurd that the place where you get financial advice, you can’t get insurance advice,” says Skelding.

John Whaley, executive director of the Independent Financial Brokers of Canada, believes the banks are testing the waters, taking tentative steps towards selling insurance directly in branches.

Skelding admits that doing everything under one roof would be preferable for the banks, but even if that does come to pass, he doesn’t view it as a threat to independent life agents.

“Most of them deal with a middle-to-upper-middle market and this is more aimed at the mass market,” he says. “So there isn’t a lot of overlap. We are actually after the uninsured market rather than trying to compete with brokers. I think they can both exist and the market can grow.”

Still, Whaley remains unconvinced. “We believe, as independent brokers, that the customer is better served by an agent or broker that can refer clients to several insurance companies so they can get the most suitable product,” he says.

Advocis president Steve Howard says his association won’t support banks selling insurance until there’s implementation and enforcement on tied selling. “We’ve had promises for years from the government to define what tied selling is and how to enforce it. Nothing has changed on that dialogue, so we can’t be comfortable with anything along the lines of banks selling insurance,” he says. “And I think every advisor across the country will have that concern.”

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