After much anticipation, on February 12 2011 the federal government released the proposed regulations to amend the Insurance Business (Banks and Bank Holding Companies) Regulations and the Insurance Business (Authorized Foreign Banks) Regulations by publication in the Canada Gazette. The proposed amendments are intended to provide greater clarity and consistency about the types of authorised insurance product that are available through the branches and online webpages of deposit-taking financial institutions.
The amended regulations propose to:
- extend generally to the webpages of deposit-taking financial institutions the application of the regulatory framework that applies to insurance business activities in branches;
- ensure that the promotion of insurance products by deposit-taking financial institutions is related to the core business of these institutions (eg, credit, mortgage or travel-related insurance);
- prevent deposit-taking financial institutions from using their webpages to promote non-authorised insurance products (eg, life, health, home and auto insurance), which is not permitted in their branches; and
- prohibit the promotion of, or web links to, insurance other than authorised insurance from all webpages of deposit-taking financial institutions.
The regulations were made necessary by the evolving use of technology by deposit-taking financial institutions and consumers. In addition, several technical amendments are proposed, including corrections to the French versions of the Insurance Business Regulations to ensure consistency with the English versions.
The federal Bank Act prohibits deposit-taking financial institutions from engaging in the business of insurance, except as permitted by regulation. Under the regulations, permitted and prohibited insurance business activities vary according to whether they take place inside or outside a bank branch, or whether they relate to an "authorized type of insurance".
Generally, the regulations provide that deposit-taking financial institutions may not promote an insurance company, agent or broker (an 'insurance entity'), or an insurance policy of an insurance entity, unless:
- the promotion takes place outside a bank branch and is directed at a large class of people (eg, all holders of credit cards issued by the deposit-taking financial institution); or
- the insurance entity deals only in an authorised type of insurance.
The regulations identify the following as authorised types of insurance:
- insurance covering losses related to credit or charge cards that is provided as a feature of such cards without request and without an individual risk assessment;
- extended warranties on purchases charged to such cards;
- coverage of liabilities arising from car rental contracts secured with such cards;
- creditors' life, disability or loss of employment insurance;
- creditors' vehicle inventory insurance;
- export credit insurance;
- mortgage insurance; and
- travel insurance.
The current rules prohibit the sale or marketing of life, health, home and auto insurance policies in branches. There are also a variety of restrictions on the ability of a deposit-taking financial institution to share information about its customers or employees with an insurance entity. However, the current regulations do not address online promotion of insurance products or whether a bank webpage qualifies as a 'branch'. In 2009 the Office of the Superintendent of Financial Institutions (OSFI) was asked to rule on the question of whether, for the purposes of the Insurance Business (Banks and Bank Holding Companies) Regulations, a bank website is a bank branch. OSFI concluded in Ruling 2009-02 that for the purposes of the regulations, a bank website is not a branch. OSFI rulings describe how OSFI has applied or interpreted certain provisions of the Bank Act, and the regulations or guidelines thereunder, but they are not necessarily binding on OSFI's consideration of subsequent transactions. In response to the OSFI ruling, the minister of finance announced that the federal government planned to tighten regulations regarding the promotion of non-authorised insurance on the webpages of deposit-taking financial institutions. The federal government felt the need to provide clarity on this issue in the regulations in light of the growing use of webpages by deposit-taking financial institutions.
The proposed regulations will extend current government policy about the permitted and prohibited insurance promotion activities of deposit-taking financial institutions to the webpages of such institutions, and will help to ensure consistency between the promotion of insurance products permitted on the webpages of deposit-taking financial institutions and the promotion that is permitted in their branches. The stated objective of the regulations is to limit the types of insurance that deposit-taking financial institutions are permitted to sell or promote to the authorised types of insurance that are ancillary to the main business of such institutions. The regime will prohibit the promotion of, and web links to, non-authorised insurance from a bank webpage. Section 2 of the existing regulations will be amended to include the following definition of a "bank web page":
"a web page that a bank uses to carry on business in Canada, including any information provided by the bank that is accessible on a telecommunications device. It does not include a web page that is only accessible by employees or agents of the bank."
More specifically, the proposed regulations will prohibit a deposit-taking financial institution from providing access on a bank webpage to a webpage (either directly or indirectly through another webpage) on which there is promotion of an insurance entity, or an insurance policy of an insurance entity, that does not deal exclusively in authorised types of insurance.
For further information on this topic please contact Stephanie Robinson at McMillan LLP by telephone (+1 416 865 7000), fax (+1 416 865 7048) or email ([email protected]).