MPs play broker in battle between insurers, banks

Consumers need safeguards to protect them if the government allows banks to promote insurance in their branches, said the chairman of the federal committee that will study the issue…"This is a very significant change that's being proposed," he said. "It certainly has the potential to impact on the public in many different ways."

The Toronto Star
May 15, 2006

MPs play broker in battle between insurers, banks
Much at stake for both in changes to Bank Act. Some see hazards in Canada's banks selling insurance.
Tara Perkins

Consumers need safeguards to protect them if the government allows banks to promote insurance in their branches, said the chairman of the federal committee that will study the issue.

"There's a reason why the status quo is as it is," said Brian Pallister, the Conservative MP who is heading up the House of Commons Standing Committee on Finance.

"This is a very significant change that's being proposed," he said. "It certainly has the potential to impact on the public in many different ways."

The divisive issue has pitted the executives of Canada's biggest insurers against executives of the country's biggest banks.

"Industry leaders are starting to look increasingly like politicians," Pallister said, noting that a lot is at stake for the financial service firms.

The Bank Act comes up for review every five years. The government decided after the last review not to allow banks to sell or market insurance policies in their branches.

The Conservatives have pushed the Bank Act's expiration date back six months to April 24, 2007 to give Parliament more time to study the issues. But it promised to release a white paper this spring laying out the major issues.

Officials at the Finance Department have indicated that the white paper is "nearing completion," Pallister said in a recent interview.

Based on the reading he has done so far there appear to be three key issues, he said.

One is whether consumers would feel additional obligation to the banks. Those who argue against the changes have raised the possibility of tied selling, or forcing consumers to buy insurance as a condition of getting other financial products. The Canadian Bankers Association points out tied selling is illegal.

Another key issue is how qualified bank staff are. There's a perception that bank staff are qualified, leading to questions about whether an unlicensed employee in a branch should be able to dispense insurance advice or brochures.

A third issue is privacy. For example, if someone applies for insurance and tells the bank they have had health issues, could that impact them when they apply for a loan? Pallister said.

"We have to be very careful that we deal with these," he said. "There need to be some safeguards."

In its election platform, the Conservative party vowed to "maintain the current regulations governing insurance marketing by the chartered banks."

Pallister said that leaves room for changes requested from the Bankers Association. It wants banks to be able to give out insurance brochures in branches, give referrals to a qualified insurance person outside of the branch, and send targeted information in the mail.

The standing committee on finance has five Conservative MPs, four Liberals, two Bloc members and one from the New Democratic Party.


Brought to you by WikidFranchise.org

Risks: Competence, Banks, Must buy only through franchisor (tied buying), Privacy breaches a prerequisite for fraud, Privacy laws, Fox to guard the henhouse (self-regulation), Canada, 20060515 MPs play

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License