Federal Finance Minister Jim FlahertyCHRIS WATTIE
Ottawa plans to restrict how insurers promote bank products online, a move that could appease the banks as the government cracks down on their Internet activities, sources say.
Finance Minister Jim Flaherty is discussing the upcoming rules with financial executives, and the regulations are still some way from being drafted, but sources say that Ottawa intends to impose restrictions on insurers.
Such a move would make it clear the government will be maintaining a strong divide between the banking and insurance sectors, one that has been slowly closing in recent years. It also risks angering insurers, specifically Manulife Financial Corp., which heavily promotes its bank products online.
Mr. Flaherty is telling the banks in meetings this month that they will be allowed to have a link to their insurance subsidiaries on their corporate Web pages - such as RBC.com or TD.com - where they list their various businesses, according to sources. But, aside from that, bank websites will not be allowed to promote or link to most types of insurance.
Mr. Flaherty also intends to tell insurers that similar rules will apply to them, according to sources. That would go beyond the restrictions that currently apply to insurers on the ground. (While banks have not been allowed to promote most insurance in their branches since 1992, fewer rules apply to insurers.)
The idea, which aims to level the playing field between banks and insurers, comes after banks complained to the Finance Department that the new rules would give insurers an advantage. Bank executives feared that insurers would be able to plow forward in a quest to become one-stop shops for financial products, while the banks would be held back.
For instance, the top of Manulife's main Canadian consumer Web page carried a large banner ad yesterday that said: "Another thing you may not know: Manulife offers more than insurance." By clicking through the ad, the customer can read about how to "get out of debt sooner" with products from Manulife Bank.
As baby boomers age, financial institutions have increasingly sought to become their main financial provider by offering an array of products, from insurance to banking to retirement planning.
The restrictions that Ottawa first placed on the banks' marketing of insurance 18 years ago followed concerns that banks, which were becoming increasingly dominant in financial services, might have too much influence on customers. Specifically, there were worries around them linking the granting of credit, such as a mortgage, to insurance, such as home insurance.
At the time, a set of rules that would put restrictions on insurers was drafted, but it never came into effect, according to a lawyer familiar with the subject.
The strongest voice in favour of maintaining the rules on banks is that of the insurance brokers, who lobbied hard for the government to impose the same rules online.
"The governments' decision is simply modernizing the rules and extending protection to consumers on the Web against undo influence and coercion," said Steve Masnyk, a spokesman for the Insurance Brokers Association of Canada. "The current rules are silent and the Minister is filling that void."
But the insurance industry has also been supportive of upholding the rules on banks.
"Technology continues to redefine aspect of the consumer experience, yet the public interest rationale for these safeguards remains as strong as when they were first adopted," Sun Life Financial spokesman Michel Leduc said. "The safeguards ought to apply online insofar as credit-granting can be used as leverage vis-à-vis consumers."
Sun Life does not have its own bank, but Sun Life advisers have recently begun referring customers to National Bank.
On Monday, Neil Skelding, the chief executive officer of RBC Insurance, said "we will comply when we have clarity with whatever rules come out."
Bank executives say they were encouraged by comments Mr. Flaherty made over the weekend, in which he said he had spent some time looking at the various websites after bankers encouraged him to do so.
"You have to draw certain lines about moving from one site to the other and so on, and as you know, they are financial groups of businesses," Mr. Flaherty told reporters in Washington. "But I think we can get there in a way that will be businesslike, that they can live with."