Brokers debate whether or not a Web site constitutes a branch

***CORRECTION***  This item has been amended to reflect the fact that IBAO’s efforts were undertaken in conjunction with similar lobby efforts by the Insurance Brokers Association of Canada (IBAC). IBAC raised the Web issue with OSFI and not the IBAO, as initially reported.

Insurance brokers in Ontario along with their colleagues from across the country, are raising the issue of whether or not a bank selling insurance through its Web site is the same thing as selling insurance through a “branch,” which is not allowed under the Bank Act.
Brokers say publicly exposing this issue will help them to gain momentum and create awareness among politicians in preparation for the 2012 review of the Bank Act legislation.
Ontario’s brokers made their views known at the Ontario Young Broker Council held in Niagara Falls on June 4.
Rod Hancock, chairman of the Insurance Brokers Association of Ontario (IBAO)’s board, said the IBAO recently held its Lobby Day at Queen’s Park, meeting with provincial MPPs. IBAO also participated in the IBAC Parliament Hill Day in Ottawa, meeting with federal MPs.
By raising this issue with Members of Parliament, Hancock explained, MPs will understand that this is a consumer issue requiring their time and attention.
Brokers said they raised two issues with politicians:
First, they say banks carrying insurance brochures should not be offering specific advice in the brochures, nor should they be referring the consumer to the bank’s conglomerate insurance company.
“It’s not the brochures that are illegal, as long as those brochures are general in nature,” IBAO CEO Randy Carroll said. But how these brochures are subsequently used in the branches could give rise to potential breaches in the Bank Act, he added.
For example, Carroll said, this might include a consumer bringing the brochure to the teller or a bank representative and receiving additional information. Or it could mean the teller passing the consumer a business card with contact information for an insurance representative. Both scenarios are illegal, said Carroll.
Another issue brought to the MPs attention is that 45% of banking done in Canada is done online, and yet banks’ Web sites often feature insurance products and bank products side-by-side.
When IBAC complained to the Office of the Superintendent of Financial Institutions (OSFI), the response it received was that OSFI did not consider an online branch a branch, Hancock said.
If this is the case, Hancock pointed out, then it’s almost as if OSFI is suggesting that online banking is not regulated. If this is the case, the same argument could be made that financial services institutions with no bricks-and-mortar offices or branches are unregulated.
“Those were the points that were made to the MPs, and they seemed to understand that it’s a consumer issue,” Hancock said.