Flaherty reins in online insurance promotion by banks

OTTAWA – Finance Minister Jim Flaherty said Thursday he will tighten regulations to limit the ability of Canadian banks to sell insurance online.

In a letter to the Canadian Bankers Association, the finance minister said the new regulations will clearly distinguish between authorized financial products, such as credit and travel-related insurance, and non-authorized products, such as life, property and casualty insurance.

The regulations will prohibit banks from either promoting or linking to non-authorized insurance form their websites, among other things.

The new rules also apply to federally regulated trust and loan companies.

"We intend to prevent banks from using their web pages to promote non-authorized insurance products, which is not permitted in their branches," said Flaherty said in a statement. "These measures were made necessary by the evolving use of technology by banks."

Last October, Flaherty warned the banks that he was prepared to clamp down on online insurance advertising if banks did not stop promoting non-authorized products on their sites.

In the early 1990s, the government allowed banks to operate insurance arms, on the condition they not market both banking and insurance products at bank branches.

But with many Canadians now doing their banking online, the definition of what constitutes a "branch" has become less clear. Several of Canada’s biggest banks currently advertise insurance on their websites.

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