Small business against insurance sales in banks, survey suggests

The majority of small business owners say the rules should not be changed to allow banks to market and sell life and health insurance products in their branches, according to a new poll.

The survey, conducted by Pollara on behalf of advisor association Advocis, found that 76% of small business owners feel that existing measures to protect consumers should be kept in place due to concerns about the use of personal information and sales pressure.

And 66% said they wanted the current prohibitions kept in place because life and health insurance companies won’t be able to compete over the long term, which will eventually lead to less choice for consumers.

Survey respondents were asked to imagine a scenario in which banks were allowed to sell life and health insurance in branches and the business owners purchased those products. More than six in 10 small business owners said they would be very (38%) or somewhat (27%) concerned about whether their health information would be kept separate from their business banking such as loan applications.

The insurance application process involves asking very personal health questions such as whether the applicant has had cancer or suffers from depression, Advocis points out. “The pressure felt by consumers to give their bank more business will be much stronger if the bank holds the consumer’s personal medical history,” argues Advocis chair Gary McLeod.

The Canadian Bankers Association has not formally asked Ottawa to allow them to sell insurance products in branches, but they have put in a request to permit more information on such products, when the Bank Act comes up for review later this year.

“The issue isn’t brochures,” says McLeod. “The issue is fundamentally about privacy and whether intimate personal information should be traded, shared or used to get more business. What the banks are calling for is more access to personal information to market more of their products.”

This isn’t the first time Advocis has argued this point. A similar study released in February indicated 78% of Canadians believe the current prohibition on banks providing information about life and health insurance, or referring customers to insurance companies, should be retained. That came hot on the heels of a separate survey released by the Canadian Bankers Association, which suggested that the majority of Canadians want easier access to insurance information in bank branches.

But Advocis now has a new ally: the Canadian Federation of Independent Business, which represent 105,000 business-owners across Canada. “Small businesses are leery of banks expanding their powers, having access to and use of personal information, and the linkage of that information to loans,” said Garth Whyte, executive vice-president of the CFIB. “Small businesses are fearful of tied selling and think that banks have enough power already.”

The Pollara poll also found that one in five small business owners whose businesses have been approved for a bank loan, commercial mortgage, lease or line of credit over the past seven tears have felt at least some pressure by their bank to give them more of their business.

“Existing consumer protections make sense,” McLeod insists. “They strike the right balance between protecting the consumer’s privacy while allowing the banks to sell insurance through subsidiaries. We think that’s fair.”