September 21, 2021 by Greg Meckbach
As the results from Monday’s federal election come in, your national industry association is promising to educate new members of parliament on why it’s important to keep banking and insurance in separate industry silos.
“We congratulate Prime Minister [Justin] Trudeau on his re-election,” Insurance Brokers Association of Canada CEO Peter Braid told Canadian Underwriter Tuesday. “IBAC will continue to work with all parties to advance our key issues. We will also make an additional effort to reach out to newly elected Members of Parliament to ensure that they become equally familiar with our fundamental positions on the Bank Act and the separation of the pillars of banking and insurance.”
As it stands, a federal law – reviewed on a regular basis – prohibits banks from providing consumers access to property and casualty insurance at the point of sale, or by linking their banking web pages to other web pages through which insurance other than “authorized” types are sold. None of those “authorized” types are home or auto.
So if a consumer applies for a loan or credit card, the lender at the point of granting credit may offer insurance covering the risk that the borrower dies, loses their job, or suffers a disability. That’s because banks are “authorized” to sell creditor’s protection coverage. But if that client is getting a mortgage or auto loan, the institution lending the money is not allowed to sell the consumer home or auto insurance.
Early Tuesday morning, the final results of Monday’s federal election were still coming in. At the time, the Liberals were leading in 158 ridings and were in position to form the next government, albeit with only a minority of MPs, the Canadian Press reported. The Liberals held 155 seats when the election was called in August.
“It’s important to first thank all candidates who had the courage and conviction to place their names on the ballot in yesterday’s election, and to recognize their individual commitments to public service. The make-up of the new Parliament, of course, is largely status quo,” Braid told Canadian Underwriter Tuesday.
So is there still a concern over a push to loosen or remove the restrictions on banks selling insurance? This is a question Canadian Underwriter asked Braid this past April.
“All indications are that the government, the federal political parties, remain committed to the separation of the pillars of banking and insurance and the consumer protection provisions [the Bank Act] provides, but we really need to never let our foot off the pedal with respect to that concern, and [we] need to make sure that the strong public policy commitment remains,” Braid said at the time. He was commenting on a bill tabled this past April that would extend the next review of the Bank Act.
Brokers warn the industry needs to be vigilant about keeping the pillars of banking and insurance separate.
“Credit and insurance are two thing that ought not be joined at the hip,” said Ted Harman, president of Montreal brokerage Accent Insurance, in 2017. At that time, the federal Bank Act was nearly up for review. Harman was concerned that some banks would try to have the government change the law restricting the way banks can sell property and casualty insurance.
“I am sure that the banks are going to try to have the current restrictions lifted,” Harman told Canadian Underwriter in 2017, commenting in his capacity as a brokerage owner.
A bank representative should not be able to say to a consumer, “We are going to give you your mortgage and, oh, by the way, here is an insurance policy to cover you,” Harman said at the time.
In addition to restricting banks from providing access to P&C insurance at the point of credit, the federal Insurance Business (Banks and Bank Holding Companies) Regulations prohibits a bank from providing – to a carrier, agent or broker – any information respecting a customer of the bank in Canada. That applies both directly and indirectly. This is why brokers are concerned about the concept of “open banking,” a system in which clients could instruct their financial institutions to share their banking data with other parties chosen by the consumer.
In its final report issued Aug. 4, the Advisory Committee on Open Banking recommended that the “initial phase” of open banking, in Canada, be up and running by January, 2023.
In that proposed initial phase, banking data should not be used for underwriting insurance policies, the committee said in the report.
“Future consideration of insurance in open banking should evaluate potentially discriminatory or inequitable outcomes in insurance availability and coverage in order to ensure consumers would be protected.”
It is the possibility of using banking data for insurance – in a later phase of open banking – that raises a “red flag,” Braid told Canadian Underwriter this past August. So the report is not a complete victory for IBAC because the recommendation pertains to an initial phase.
At the time, Braid noted that the open banking report is from an advisory committee and any final decision would ultimately be made by the federal finance department.
Feature image: A voter casts their ballot in the 2021 federal election. THE CANADIAN PRESS/Ryan Remiorz