The Ontario government is proposing that the province’s credit unions be allowed to sell insurance products within their branches and on their websites. The proposal is part of a new regulatory framework to govern the province’s credit unions that the government announced in its 2020 budget on Thursday.
The Credit Unions and Caisses Populaires Act, announced today, is intended to replace the Credit Unions and Caisse Populaires Act, 1994. The government had previously committed to updating the existing act and completed a legislative review to modernize it earlier this year.
Current provincial legislation prevents credit unions in Ontario from selling and promoting insurance products other than credit, mortgage and travel insurance in branches. In 2015, the previous provincial government made changes to the act that specifically prohibited credit unions from promoting “non-authorized” insurance — such as auto, home and individual life and health insurance — on their websites.
The proposed new legislative framework would also allow “insurance intermediaries and credit unions to seek mutual beneficial business relationships that could reduce costs,” the budget document stated.
Examples of this include a credit union and a local insurance brokerage co-locating in the same space, or a referral relationship between a credit union and a local insurance brokerage.
According to the budget document, the proposed legislative framework would reduce regulatory burden on credit unions, boost competitiveness by expanding business opportunities and promote trust and stability.
“Now more than ever is the time to ensure that the credit union and caisse populaires sector is competitive and not constrained by outdated or overly prescriptive legislation and regulations that limit its growth opportunities,” the budget document stated.
The new framework would remove restrictions that limit credit unions’ ability to invest and broaden its ability to offer services to consumers. The new framework would also include a market code of conduct to boost consumer protection and a “strengthened” compliance regime.
The government said that it would work with stakeholders on necessary regulations and with the Financial Services Regulatory Authority (FSRA) to develop rules through to the end of 2021, with the intention to enable the new framework to come into force in 2022.
Earlier this year, at the start of the Covid-19 pandemic, the provincial government provided additional liquidity to the credit union sector to support its members. In the budget, the government announced that it approved an increase to FSRA’s line of credit with the province, which allows the regulator to provide emergency liquidity support should the need arise.
There are 65 credit unions in Ontario serving 1.8 million members.