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Insurers lodge complaint against RBC, BMO

Canada's insurance brokers have lodged a complaint against Bank of Montreal and Royal Bank of Canada.

Deborah Baic/The Globe and Mail/Deborah Baic/The Globe and Mail

Canada's insurance brokers have lodged a complaint with the country's banking regulator, alleging that two big banks are flouting Ottawa's rules by promoting insurance on their websites.

The brokers have also made their concerns known to Finance Minister Jim Flaherty, who surprised the banks in 2009 when he said he was going to stop them from selling or promoting most types of insurance on their websites. The banks say that they are complying with the rules.

That the issue is still contentious almost three years later underscores the strong desire of banks to push further into insurance to find growth – and the fierce battle that the brokers are waging to stop them. It's a battle that Mr. Flaherty must ultimately referee, and he has made it clear that he wants to maintain a strong separation between banking and insurance.

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Dan Danyluk, chief executive officer of the Insurance Brokers Association of Canada, sent a letter to the Office of the Superintendent of Financial Institutions (OSFI) last week alleging that both Royal Bank of Canada and Bank of Montreal still have links to insurance information on their websites that are not allowed under the new rules.

Although Mr. Flaherty announced the rules three years ago, and said he expected banks to comply at that time, the regulations spelling them out did not come into force until March 1 of this year.

"This all started two-and-a-half years ago when the minister asked the banks to voluntarily take the information off of their bank websites, and they said that they would comply once the regulations were in place," said Steve Masnyk, a spokesman for the brokers' association.

"These banks are not complying with the regulations. We would expect that OSFI would enforce the Bank Act."

Mr. Flaherty has said that by placing restrictions on the sale of insurance on bank websites, he is seeking to replicate on the Internet the laws that govern banks on the ground.

The federal Bank Act prohibits banks from selling or marketing most types of insurance in their branches, but allows them to own separate insurance companies and offices.

Those rules were created two decades ago because of concerns that banks, which were becoming increasingly dominant in financial services, might have too much influence on consumers. Specifically, there were worries about banks linking the granting of credit, such as a mortgage, to insurance, such as home insurance.

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Insurance brokers have lobbied hard to keep those rules in place. But banks nevertheless have been pushing more boldly into insurance in recent years, with Royal Bank of Canada and Bank of Nova Scotia building insurance offices next door to some of their bank branches.

The brokers' group sent screenshots of the Royal Bank and Bank of Montreal websites to OSFI and to Mr. Flaherty, which it says show the banks are breaking the rules. For example, it says that by following links on RBC's home page, consumers can be taken to promotional materials for car insurance, life insurance and health insurance; from the websites describing that insurance, they can click back to banking.

Neil Skelding, CEO of RBC Insurance, said the company "has made every effort to fully comply with all of the new regulatory requirements regarding the selling of insurance via bank websites."

RBC earned $190-million from its insurance business in the three months ended Jan. 31, or 10 per cent of its $1.86-billion in total profits for that period.

The brokers allege that Bank of Montreal is contravening the rules by including information about "balance protection insurance" for credit cards that states that the insurance comes from Manulife Financial.

A spokesperson for BMO said it "is complying with the Bank Act and its regulations."

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