Bank on Resistance

Being an independent broker can be an eye-opening experience. Dealing daily with customer issues and concerns that are as quickly evolving as industry conditions can sometimes be difficult, but is, nonetheless, worth the effort.

One such issue – a perennial focus of the Insurance Brokers Association of Canada (IBAC) and regional associations across the country – is the Bank Act. Subject to review every five years, the Bank Act is nearing its next examination in 2017, making the topic even more top of mind than usual during the 2015 “Hill Day” on Parliament Hill this past June 2.

IBAC is not only well-informed on this issue, but also well-received by Members of Parliament (MPs) and staffers alike. This is critically important, perhaps now more than ever, in light of the changes and challenges from existing and new entrants to the independent broker channel.

To have the face-to-face ability to inform politicians about the facts about the banking industry and its desire to sell insurance at the point of granting credit is key.

To date, politicians have agreed with the broker position, but that does not mean brokers can rely on that always being the case. Brokers must redouble their efforts by continuing to inform MPs that any changes to allow banks to sell insurance at the point of credit would not be in the best interest of consumers, their constituents, across the country.

Banks and financial institutions can sell certain types of insurance, but these are restricted. The eight “authorized” types of insurance that can be sold are credit or charge card-related, creditors’ disability, creditors’ life, creditors’ loss of employment, creditors’ vehicle inventory, export credit, mortgage, and travel.

Canadian banks can sell other types of insurance – such as property and auto – through subsidiaries, but are strictly prohibited from selling “other” types of insurance through their branches.

Since March 2012, when the latest amendments to the Bank Act with respect to selling insurance took effect, banks have also been prohibited from providing access, from their web pages, to other web pages through which insurance other than “authorized” types are sold.

Protecting consumers is no easy task, especially when brokers are challenging an issue that involves big business, such as the banks. To date, as small business owners, it has been rewarding and encouraging that elected officials are listening to brokers and their concerns about watering down protections now included in the Bank Act with respect to selling insurance.

CONSISTENT MESSAGE

With the impending review of the Bank Act, the Canadian insurance industry – including independent brokers – is obliged to keep informing both federal and provincial politicians about what is best for consumers. The message has always been, and will continue to be, clear and consistent: No bank shall be able to sell insurance at the point of granting credit.

Canada is one of the last, if not the very last, country that prohibits banks from selling insurance at the point of granting credit. This is no easy feat, but, again, it demonstrates the value that continued hard work and perseverance by IBAC, regional broker associations and individual brokers themselves can bring.

Banks are ramping up efforts to expand and grow their businesses. With efforts on the international front perhaps not being as successful as the banking industry had hoped, this is leading them back home. Banks have clearly grown and prospered, realizing record profits, but with very few options to expand, brokers feel the time is ripe for banks to once again attempt to expand into the insurance sector.

To date, IBAC and brokers alike have been successful in gathering politicians’ support and fending off efforts by banks to sell insurance at the point of granting credit because, once properly informed, MPs recognize that credit is a very powerful tool – a tool that should not be left in the hands of powerful organizations such as banks and lending institutions.

Whether a first-time or established borrower, consumers are typically at their most vulnerable when trying to secure credit and during the process of borrowing money for life’s necessities. Be it a car or a home, many consumers are simply overwhelmed by the borrowing process.

Allowing banks the ability to push insurance products at the same time as the credit-granting process – no doubt, an anxious time for consumers – is not in the best interest of Canadian consumers. Kudos to political representatives for recognizing this influence to date.

That said, a major concern to IBAC with this go-around of the Bank Act is the impending federal election. Brokers, like all Canadians, could see many changes on Parliament Hill, with 30 new ridings and many MPs retiring.

These changes mean brokers could potentially have to deliver their message to a staggering 150 new faces in Parliament this year – a tall order, indeed. Add to this that new MPs will likely be ill-informed about the Bank Act, the broker message and the implications for the broker channel and consumers.

Clearly, getting back to where brokers now are with MPs will be no small task, and related efforts should be top of mind for brokers across the country.

Stephan Bernatchez, who will soon take on the task of IBAC chairman, told those assembled for the IBAC Annual General Meeting in late September that “in the year of an election, we need to be sharp and get involved in every

community across Canada, whatever the party, and make sure that the newly elected Members of Parliament get educated on our message.”

BANDING TOGETHER

Brokers have banded together to battle for what they believe is best not only for the independent broker channel, but also for the consumers they represent. This is one of those times.

It is not an objective, however, that IBAC can reach on its own. When pushing back against organizations as large and as powerful as the banks, the entire brokerage industry must work together, sharing a common voice and advancing a single agenda.

This will demand that IBAC and its regional counterparts be prepared to properly inform politicians about the banks and the reasons for not allowing them to sell insurance at the point of granting credit. Brokers need to step up to help IBAC by being informed, involved and active with delivering that message to local MPs.

A lone broker may feel that his or her individual voice will never be heard. But it can be. Combining the voices of many brokers, delivering the same message to their MPs, will help broadcast the broker message for the good of consumers nationwide.