OTTAWA — The federal government intends to stop banks from using the Internet to promote and sell insurance on their websites.
Finance Minister Jim Flaherty said Wednesday he has written the banks telling them to stop marketing their insurance activities on the bank websites, adding that he intends to pass legislation to make the practice illegal in the future.
Currently banks can sell insurance through separate subsidiary companies, not branches.
In a recent ruling, however, the Office of the Superintendent of Financial Institutions found that under existing law the policy separation did not extend to websites.
“But in my view it contravenes the policy intent,” Flaherty said.
late Wednesday outside the Commons.
“I wrote the banks telling them this was not consistent with government policy … and asked the banks to quickly stop the practice.”
The minister’s action comes as Liberal MP Alexandra Mendes introduced a private members bill with the intent, she said, of levelling the playing field between Canada’s large banks and independent insurance companies.
The insurance brokerage industry had complained to the federal government and lobbied MPs about the issue.
Mendes called current legislation outdated, noting that the law still refers to telecommunications and not the Internet.
“The banks have been using outdated regulations to the disadvantage of the independent insurance brokers, companies and agents to advance their own insurance agendas,” she said.
Banks like Royal and TD are major insurance providers through subsidiary companies, RBC Insurance and TD Insurance.
But the banks have been pressing Ottawa for years hoping to get the right to sell personal insurance policies from their branches, saying that consumers would benefit from cheaper premiums for life, auto, home and other types of insurance.