Canadian insurance brokers are seeking a legislative change to the Bank Act so they can find out what happened to their complaints this year about banks’ adherence to regulations concerning insurance sales.
The Insurance Brokers Association of Canada (IBAC), representing 36,000 property and casualty brokers across the country, brought forward three complaints in 2012 about banks’ conduct to the Office of the Superintendent of Financial Institutions (OSFI).
Two complaints in April related to the compliance of RBC and the Bank of Montreal to new regulations in Canada that prohibit banks from selling unauthorized insurance on bank websites. Both banks have maintained publicly that they are in compliance with the rules.
In the third complaint, brokers accused RBC last month of selling insurance to consumers based on information the bank had obtained from its credit card holders.
To date, brokers haven’t heard back from OSFI on any of their complaints. Nor will they, since Section. 636(1) of the Bank Act in Canada says all discussions between OSFI and the banks related to the enforcement of the Bank Act must be kept confidential.
IBAC says it understands the need for confidentiality when OSFI is dealing with banks about regulations concerning prudential or solvency issues. But IBAC believes matters that relate to market conduct should not be kept confidential.
“Interactions between Canadians and banks should not be confidential, whether the banks are following the rules or not,” IBAC representative Steve Masnyk told Insurance Business. “This blanket confidentiality needs to be reviewed when it comes to market conduct. That’s something we hope to raise with the department and the legislators over the next couple of months. Perhaps the legislation needs to be re-thought.”
OSFI says the confidentiality rules are in place because “to confirm or deny the existence of an investigation could unnecessarily cause harm to a financial institution.”
“Where a complaint is within our mandate, OSFI takes appropriate action to address the concern directly with the financial institution,” OSFI communications officer Léonie Roux says. “OSFI usually discusses the matter with the financial institution to confirm the facts and asks the financial institution to justify the legality of its actions.
“If OSFI is of the view that the financial institution is in violation of the law, it requests the financial institution to rectify the situation and comply with the governing legislation. OSFI does not disclose the outcome of these matters.”