Online Retailing of Insurance by Credit UnionsIBAO - May 2014

The 2014 Ontario budget proposes to extend rules that currently prohibit retailing of unauthorized insurance products by Credit Unions to the online world.

Page 87 of the 2014 Ontario Budget says: “The Province is proposing to prohibit credit unions from online promotion of insurance products such as home and auto insurance, which they are not permitted to promote in their branches.”

IBAO Response: The Insurance Brokers Association of Ontario (IBAO) is delighted that the 2014 Ontario Budget proposes to ban online retailing of unauthorized insurance products. Premier Wynne committed to examining the issue in October 2013 and today we are pleased to see that the government has sided with consumers.

Background Credit Unions are prohibited from selling or marketing unauthorized insurance products

such as home and auto insurance in their branches; Credit Unions are currently marketing insurance on their credit union websites despite

the intent of the regulation 237/09, Sections 35-43 under the Credit Unions and Caisses Populaires Act that prohibits the promotion or selling of unauthorized insurance products

Banks have the same prohibitions under The Bank Act Credit Unions and banks provide wealth management services. Insurance products are

risk management services that require different competencies The prohibition protects consumers from cross-selling tactics from persons not properly

trained to provide insurance advice This protects consumers who are vulnerable at the point of lending from an obligation

to purchase an important insurance product under duress IBAO wrote to FSCO in 2012 asking that they enforce prohibitions on retailing of

insurance products in the online space the same way it does for ‘brick and mortar’ credit unions

FSCO responded saying that the Act does not prohibit online retailing of certain insurance products despite the explicit prohibitions on retailing contained in the regulations

Federal Bank Act On March 1, 2012, new regulations came into force under the Bank Act explicitly

prohibiting online retailing of unauthorized insurance products on Bank websites; Before this, banks were retailing insurance online despite prohibitions from marketing

and selling these products in ‘brick and mortar’ locations; The Banks’ position was that the regulation did not apply to ‘virtual’ locations

Solution Harmonize Ontario credit union regulations with new Bank Act regulations

Roundtable Consultation On October 23, 2013, Premier Kathleen Wynne announced that the Ontario government

would review the online promotion of insurance products by credit unions. On January 24, 2014, a Roundtable Consultation – “Review of online promotion of

insurance products by credit unions” was convened by the Ministry of Finance. The two hour session was attended by nine organizations including IBAO. IBAO believes that the current gap subverts the stated intent of longstanding Ontario

policy. Therefore, in our view, any equivocation by the Ontario government on extending

these prohibitions would be tantamount to the government reversing its longstanding policy prohibiting this activity in-branch.