IBAC complains RBC is defying federal regulations

The Insurance Brokers Association of Canada (IBAC) has taken aim at the country’s largest bank, arguing in a letter to the Office of the Superintendent of Financial Institutions (OSFI) that RBC is flouting federal rules by allowing its insurance arm to solicit new business from current banking customers.

At the heart of the complaint is marketing correspondence on RBC Insurance letterhead that appears to breach the prohibition against a bank sharing its customer information with an insurance company.

“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 marketing material states. “And if you use your RBC Rewards credit card to pay for your insurance premiums, you can earn RBC Rewards points.”

Dan Danyluk, CEO of IBAC, notes in a July 20, 2012 letter to OSFI that the marketing correspondence “attempts to leverage the customer’s relationship with RBC Royal Bank in order to entice and solicit the customer to insure his cars and home with RBC Insurance.” Section 8 of the Insurance Business (Banks and Bank Holding Companies) Regulations “prohibits banks from providing or permitting their subsidiaries and affiliates to provide, directly or indirectly, an insurance company, agent or broker with any information respecting a customer of the bank in Canada,” Danyluk writes.

“That’s fundamental to the separation between banking and insurance, not being able to share with any insurer, whether it’s their own or not, any kind of banking customer information,” says Steve Masnyk, manager of public affairs at IBAC.

What IBAC would like to see is fairly simple, Masnyk says. “We would hope the biggest companies in the country, i.e. the banks, with all their compliance people, would actually abide by the regulations.”

What happens with the complaint, however, may never be known, Masnyk says. The Bank Act makes confidential any kind of discussions between OSFI and any of the banks it supervises, he adds.

“We understand the need for confidentiality when it comes to solvency or prudential matters between OSFI and the people it supervises,” Masnyk says. “However, when it’s a market conduct issue and it affects every single Canadian consumer, there should be some kind of mechanism for the Canadian consumer to know whether banks’ behaviour is actually against the rules or not against the rules.”

RBC reports it is “committed to regulatory compliance and respects the Bank Act and privacy legislation.”