The federal government has thickened the wall between the banks’ core operations and their insurance arms. As of March 1, 2012, banks will be prohibited from linking their main banking websites to sites that feature insurance products unrelated to their banking business.

The new amendments to the Bank Act stipulate: “A bank shall not, on a bank web page, provide access to a web page — directly or through another web page — through which there is promotion of an insurance company, agent or broker that does not deal in authorized types of insurance.”

“Authorized” insurance products are those that are connected directly to banking products, such as creditor insurance or travel insurance. These are not affected by the revised legislation.

The amendments apply to products such as home, auto and life insurance, which are considered “unauthorized” because they are not directly connected to a banking product.

Under the new rules, Toronto-based Toronto-Dominion Bank, for example, would not be allowed to place on its banking website a link to TD Insurance Co.

Although banks have always been required to maintain physical barriers between their banking branches and insurance branches, the online world has been a grey area. Up until Finance Minister Jim Flaherty announced his intention to extend those rules to websites in October 2009, some banks were promoting and selling both unauthorized and authorized insurance products through pages linked to their banking websites.

Some banks took action when the impending changes were announced two years ago. Toronto-based Bank of Nova Scotia, for example, had removed all direct links to its ScotiaLife Financial website from its main banking website by September 2010.

And Canadian Imperial Bank of Commerce and Bank of Montreal, both based in Toronto, are redeveloping their website links and plan to be compliant well before the regulations take effect. Currently, their main banking pages still have links to unauthorized insurance products.

The change has already taken a toll on ScotiaLife’s web traffic, according to Mark Cummings, senior vice president and head of insurance in Canada with Scotiabank, but the bank is adapting. Prior to the move, more than 80% of the insurance page’s traffic had come from Scotiabank’s main banking website; today, only 17% of the traffic reaching the insurance web page comes from the main site.

To recapture web traffic, Scotia-Life has invested more resources into “search engine optimization” tools for the ScotiaLife website, says Cummings: “We aren’t as reliant on the main website anymore.”

The amendments clear up any confusion about how the rules apply, says Byren Innes, senior vice president and director of Toronto-based insurance consultancy NewLink Group Inc.: “The regulators have now made it clear that a bank branch is a physical building but also a virtual web page. And, therefore, the rules are the same.”

The banking sector is complying, albeit with reservations. Says Maura Drew-Lytle, spokeswoman with the Canadian Bankers Association in Toronto: “Imposing artificial and inconvenient barriers is not in the best interest of clients.” IE