Royal submits recommendations regarding Banking Act reforms

In lieu of its recent push to convince the federal government to pass a reform allowing banks increased rights to sell insurance directly through branches, the Royal Bank of Canada recently used its 11-page submission to reiterate what it sees as a need for reform resulting from consumer need and convenience.
In the submission, released this week, Royal says allowing banks to sell insurance would improve customer service and lead to better and more affordable policies.
“Making it easier for Canadians to purchase or learn more about insurance services and products in bank branches would promote efficiency, enhance competition, expand access and be more convenient for all Canadians,” it says.
One other Canadian bank, besides Royal, made a submission to Ottawa in preparation for a review of the Banking Act to be completed by October 2006. The Bank of Nova Scotia also advocated for change, stressing a need for more foreign bank involvement and clear rules for domestic mergers.
In addition, the Canadian Bankers Association (CBA) making submissions on behalf of other Canadian banks called for an end to laws preventing banks from referring customers to their own insurance subsidiaries. However, the CBA does not recommend banks be allowed to sell insurance at the branch level whereas Royal’s proposal advocates banks selling insurance through their branches.
“An important element of this evolution has been the removal of barriers that limit efficiency, competition, convenience and choice,” Royal’s submission says. “One of the more significant changes in this area has been the breakdown of the barriers between financial institutions.”
Royal recently opened an insurance sales office located next to its own bank branch and has remained within the law by keeping the two offices separated by a minimal distance and a rule not allowing employees to send customers over to the insurance office. Royal’, however, proposes the Bank Act be reformed to allow the two offices to become integrated.
In rebuttal, the Insurance Brokers Association of Canada (IBC) says, in its submission, that the size and networking ability of banks give them too much advantage, meaning a decrease in brokerage jobs and competition. As a result, the IBC says customers would have fewer policy options, as brokers offering a variety of products from several companies would be less represented in the insurance market.