Canada’s insurance brokers are asking regulators to look into the possibility that Royal Bank of Canada is sharing customer data with its insurance arm.
The move escalates the already heated battle between the brokers, who make their living selling insurance, and the banks, which are doing all they can to muscle further into the business. RBC, the country’s largest bank, says it is complying with regulations.
The complaint stems from a marketing letter, which appears to be a form letter, that RBC Insurance sent to an individual in Alberta.
“As an RBC Royal Bank credit card client, you already have a relationship with RBC Royal Bank,” the letter states. “Now you can trust RBC Insurance for your insurance needs.”
The letter goes on to note that “if you use your RBC Rewards credit card to pay for your insurance premiums you can earn RBC Reward points.”
As it turned out, this particular customer was a member of the Insurance Brokers Association of Canada.
Ottawa has rules that are designed to stop banks from marketing or selling insurance in their vast branch networks (and more recently on bank websites) and that place other barriers between banks and the insurance companies they are allowed to own.
The rules were created partly out of concern that banks would have too much power over potential customers if they were able to tie the granting of credit or loans to buying insurance. The rules include restrictions on the flow of information between banks and their insurance arms.
A spokesperson for the bank said “RBC operates on the fundamental principle of regulatory compliance, which includes designing our work flows and processes to respect the Bank Act and privacy legislation, while at the same time delivering a superior client experience.”
In a letter to the Office of the Superintendent of Financial Institutions (OSFI), Dan Danyluk, the chief executive of the brokers’ association, alleges that RBC has broken the rules, either directly or indirectly, by sharing this particular customer’s name, address, and the fact that the individual holds an RBC credit card, with RBC Insurance.
In response, the regulator sent an e-mail to the brokers’ association to say it is looking into the matter. The brokers’ also flagged the issue for Finance Minister Jim Flaherty.
RBC has been at the forefront of the banking industry’s push to have the rules changed. It was the first to build insurance offices right next door to some of its bank branches, in an attempt to bolster its insurance sales while following the rules that say banks cannot promote insurance in their branches.
A few months ago the insurance brokers lodged a complaint with OSFI alleging that RBC and Bank of Montreal were flouting Ottawa’s rules by improperly promoting insurance on their websites, an allegation that both banks defended themselves against, arguing that they were complying with the rules.
The federal government has vowed to maintain the separations that exist between banks and insurance, despite lobbying from the banks, and this latest complaint suggests that officials in Ottawa will be refereeing the battle for some time to come.
“The marketing letter from RBC Insurance is a development raising serious concerns, especially since it is unlikely to have been an isolated incident,” Mr. Danyluk wrote in his letter.