Online Retailing of Insurance by Credit Unions

The Insurance Brokers Association of Ontario (IBAO) is asking the Ontario Government to extend rules that currently prohibit retailing of unauthorized insurance products by Credit Unions to the online world.

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 While IBAO appreciates the governments attention to this matter, were concerned that a lack of agreement on this matter will be used to justify remaining with the status quo IBAO believes that a process that requires full agreement amongst opposed parties is impossible, especially when the group chosen includes an unbalanced representation of the credit union sector Furthermore, IBAO does not feel that current Ontario policy backed up by statute and paralleled at the Federal level needs to be litigated IBAO believes that the current gap subverts the stated intent of longstanding Ontario policy 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.