After much anticipation, 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 on February 12, 2011. The proposed amendments are intended to provide greater clarity and consistency about the types of authorized insurance products that are available through the branches and on-line web pages of deposit-taking financial institutions. The amended regulations propose:
- to generally extend to the web pages of deposit-taking financial institutions the application of the regulatory framework that currently applies to the insurance business activities in branches;
- to ensure that the promotion of insurance products by deposit-taking financial institutions is related to the core business of these institutions (such as credit, mortgage or travel related insurance);
- to prevent deposit-taking financial institutions from using their web pages to promote non-authorized insurance products (such as life, health, home and auto insurance), which is not permitted in their branches; and
- to prohibit the promotion of, or web links to, insurance other than authorized insurance from all web pages of deposittaking 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 only promote an insurance company, agent or broker (an “Insurance Entity”), or an insurance policy of an Insurance Entity, if either (i) the promotion takes place outside of a bank branch and is directed to a large class of people (such as all holders of credit cards issued by the deposit-taking financial institution), or (ii) the Insurance Entity deals only in an “authorized type of insurance”. The regulations identify the following as “authorized type 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; or
- Travel insurance.
The current rules prohibit the sale or marketing of policies of life, health, home and auto insurance 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 on-line promotion of insurance products or whether a bank web page 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 purpose of the Insurance Business (Banks and Bank Holding Companies) Regulations, a bank website is a bank branch. OSFI concluded in Ruling No. 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 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-authorized insurance on the web pages 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 web pages 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 web pages of such institutions, and will help ensure consistency between the promotion of insurance products permitted on the web pages 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 “authorized 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-authorized insurance from a “bank web page”. Section 2 of the existing regulations will be amended to include a definition of “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 deposittaking financial institution from providing access on a bank web page to a web page (either directly or indirectly through another web page) on which there is promotion of an Insurance Entity, or an insurance policy of an Insurance Entity, that does not deal exclusively in authorized types of insurance. Interested parties may provide comments on the proposed regulations to the Department of Finance until March 11, 2011.