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Canada said Thursday it was cracking down on banks that market “unauthorized insurance” on their websites, spelling out new rules designed to keep the realms of banking and insurance separate.
Canada’s banking laws have long forbidden banks from selling insurance directly through their branches, but in recent years they have skirted the rules through the Internet and stand-alone insurance offices.
By banning online insurance sales by banks, the government is choking off a growing source of revenue for the lenders, while protecting the bread and butter of Manulife Financial Corp., Sun Life Financial Inc. and Canada’s other insurance leaders.
“These measures were made necessary by the evolving use of technology by banks,” said Finance Minister Jim Flaherty in a statement.
The new rules distinguish between authorized insurance products, such as credit and travel-related insurance, and non-authorized products, such as life, property and casualty insurance.
Under the directive, Canadian banks can display links to subsidiaries that deal in non-authorized insurance only on their corporate web pages, where no financial products are promoted.
Flaherty said last month that he planned to meet with the banks to clarify the rules.
All of Canada’s major banks — Royal Bank of Canada , Toronto Dominion Bank, Bank of Nova Scotia , Bank of Montreal and Canadian Imperial Bank of Commerce — offer a variety of insurance products, and several are aggressively trying to expand their insurance businesses.
While the Bank Act prohibits banks from directly selling insurance in branches, the Office of the Superintendent of Financial Institutions ruled last June that “a bank website is not a bank branch” and therefore a bank could promote insurance products on its website.
Flaherty said he disagreed with the ruling, which was seen as a blow to the thousands of insurance brokers across Canada.
(Reporting by John McCrank; Editing by Frank McGurty)