The Insurance Brokers Association of Canada (IBAC) is welcoming explicit restrictions on banks’ business powers related to insurance contained in Bill C-74, but wants to make sure the historical separation between banks and insurance continues.
The federal government’s recently introduced budget implementation bill includes proposed amendments to the Bank Act that give greater flexibility for financial institutions to undertake fintech activities. In essence, the bill proposes to give banks expanded networking capabilities to newly permitted entities, as well as new powers to make customer referrals to other entities, such as fintechs, IBAC CEO Peter Braid told Canadian Underwriter Friday.
Bill C-74 authorizes banks to share data with unregulated entities such as fintechs. In addition, it authorizes banks to control fintech entities whose main business is “financial services.” Brokers are concerned that, under Bill C-74, nothing prevents banks from sharing information with their insurance subsidiaries through fintechs.
“As fintechs are essentially ‘unchartered waters,’ care must be taken to ensure that the regulations continue to maintain the restrictions that prevent banks from selling insurance at the point of credit, and prevent any loopholes or unforeseen consequences that may arise through the use of emerging technologies,” Braid said.
Currently under the Bank Act, with few exceptions, banks cannot provide a customer’s banking information to any insurance provider, including subsidiaries. The rules are designed to protect consumers from feeling pressure to accept the bank’s insurance at the point of sale instead of exploring other options.
While IBAC is pleased that the changes specifically maintain banks’ existing restrictions, Braid said that “it will be important to ensure the historical separation between banking and insurance continues to be preserved.”
Not selling insurance at the point of credit is a position that has been upheld by successive governments and further expanded to include the online environment, IBAC added.
Braid said in a release Thursday that it’s encouraging that the bill reinforces the prohibitions on banks entering the insurance space. “However, as the government now moves to develop regulations, it will be important to guard against unintended consequences,” he said. “We must ensure that banks are not allowed to do through the back door what they’re prohibited from doing through the front door with regards to retailing or make referrals in the insurance marketplace.”