TORONTO (Reuters) - Canada’s insurance brokers have filed a complaint with the country’s bank regulator against Royal Bank of Canada RY.TO, the country’s biggest bank, alleging the lender violated rules that prohibit banks from selling insurance alongside banking products.
The dispute is the latest in a years-long battle between insurance brokers and the banks, which already dominate Canada’s investment banking and asset management industry, and are eager to push further into the insurance business.
The complaint centers on a letter sent last month by RBC to a bank client in Calgary offering insurance products, a violation of rules, the Insurance Brokers Association of Canada (IBAC) said in the complaint.
The bank client, as it turned out, was a member of IBAC, and brought the letter to the organization’s attention.
“As an RBC Royal Bank credit card client, you already have a relationship with RBC Royal Bank. Now you can trust RBC Insurance for your insurance needs,” the letter reads, according to a copy obtained by Reuters.
Canadian banks are allowed to sell insurance, but are prohibited from selling insurance alongside banking products or passing marketing information between the two businesses.
This is meant to keep banks from tying the selling of car loans, for instance, with buying car insurance.
The rules mean that a customer taking out a loan in a bank cannot be directed to or informed of insurance products offered by that same bank. It has led to bizarre situations such as bank branches being located next to, but not connected to, insurance offices run by that same bank.
Recent tension has focused on the marketing of insurance through bank websites, and IBAC filed a complaint earlier this year alleging RBC and Bank of Montreal BMO.TO broke those rules.
“We are surprised that the banks continue to defy the (rules) when it comes to banking and insurance,” IBAC spokesman Steve Masnyk said.
The group filed the complaint with the Office of the Superintendent of Financial Intuitions (OSFI), the country’s banking regulator. OSFI is looking into the matter, a spokesman said.
RBC’s shares were up 1.2 percent at C$53.95 on the Toronto Stock Exchange late on Friday afternoon.
“We are committed to regulatory compliance and respect the Bank Act and privacy legislation,” the bank said in a statement.
Canadian banks report third-quarter earnings next week.
Editing by Matthew Lewis