Canada to stop insurance sales on bank websites
By Andrea Hopkins and Pav Jordan
TORONTO (Reuters) - Canada will prohibit major banks from marketing insurance products on their websites, marking a major victory for big insurers in a long-running battle with the banking industry.
Canadian Finance Minister Jim Flaherty told Canada's Business News Network (BNN) that rule changes will come in with the next budget implementation bill in early 2010, effectively reversing a decision in favor of the banks earlier this year from Canada's financial regulator.
"I've made it clear now that we will change the rules so that the marketing of insurance via web sites, virtual bank branches, will not be permitted," Flaherty said.
While Canada's Bank Act prohibits banks selling insurance through branches -- the subject of a decades-long political battle with insurance brokers -- big banks have slowly expanded into the C$115 billion ($108 billion) domestic insurance market in a bid to increase earnings and market share.
Hungry for growth, the top banks have beefed up insurance arms, pushing sales on the Internet, in stand-alone insurance branches or through insurance subsidiaries, carefully skirting government regulations meant to keep insurance and banking separate.
As recently as June, bankers celebrated a ruling by the Office of the Superintendent of Financial Institutions (OSFI), saying banks could promote insurance on their websites.
"We are completely shocked that Mr. Flaherty would want to limit how and where consumers can access information about insurance," the Canadian Bankers Association said in a statement after Flaherty announced the rule changes.
All of Canada's major banks -- Royal Bank of Canada, Toronto Dominion Bank, Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce -- offer some variety of insurance and several are aggressively trying to grow the business. Continued...