Banks prohibited to sell insurance online

Posted on October 17, 2009 and updated September 30, 2010 in Life Insurance Canada News 2 min read

Canadian banks are shocked about the new initiative from the finance minister Jim Flaherty. He wants to amend the Bank Act, which prohibits banks from selling insurance at their branches and also through their websites.

Bank representatives are shocked, stating that Flaherty prepared this serious amendment without any consultation with the banking industry. Virtually all banks in the country are targeting the lucrative insurance market to offset their fallen revenues from traditional banking products and had started to offer insurance products on their websites.

We have expressed our negative opinions about selling insurance online in one of our recent articles. The Government’s initiative is based on a different reasons. However, it will surely help thousands of insurance brokers and advisors across the country. Insurance products are complicated and should be treated as such. As the points of sale (websites) have become more and more simplified, the quality of the services offered has declined. Well tailored insurance policies require the help of experienced advisors and these cannot be found on impersonal bank websites.

On the other hand, banks are becoming more and more interconnected with the insurance industry through other channels such as mergers and acquisitions. If a bank really wants a share of the insurance market, it can do so through these channels. In that case, the government’s initiative becomes just a useless political exercise. The Government should probably focus more on maintaining or even raising the quality of services in the insurance market.

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An independent
An independent

I find it hard to believe that insurance brokers are supposedly independent when they receive their commission income from insurance companies. Not all companies pay the same commissions. How can an advisor be independent when company A may pay the agent a higher commission versus company B and the commission amount has nothing related to the amount of work or type of policy for specific clients.

If agents were truly independent, they would provide full transparency on commissions received (including any volume bonus, trips paid for by insurance companies, and other forms of incentives)…a very rare practice indeed.

steven
steven

I am an advisor with a bank owned insurance company. I am a CFP and I have 19 years experience in the financial services industry.I have been an independent broker as well and so I know both sides of the equation. My company is extremely competitive in all price segments and is actually better priced in most categories be it mer’s on seg funds or basic term insurance. It all comes down to service and integrity and I believe that I provide that to my clients. What exactly does the independent insurance industry have to fear? I could help so… Read more »