Credit unions (CUs) operating in Ontario are facing new restrictions on their ability to promote life insurance and property and casualty (P&C) insurance products online, adding to the in-branch restrictions CUs already face. Although the new rules are a disappointing move for CUs, in that the restrictions ultimately reduce consumer access to products, the move could be viewed as an important consumer protection measure.

“Our position is the same as with the banks,” says Susan Allemang, head of regulatory and policy affairs with Mississauga, Ont.-based Independent Financial Brokers of Canada. “We feel that there needs to be some separation [of banking and insurance] for the protection of consumers.”

In early October, the Financial Services Commission of Ontario (FSCO) announced amendments to the Credit Unions and Caisses Populaires Act, 1994 (CUCPA), which will prohibit Ontario CUs and caisses populaires from promoting “non-authorized” insurance – such as auto, home, individual life and health insurance – on their websites.

Unlike financial co-operatives in certain other provinces, CUs and caisse populaires in Ontario already are prohibited from selling and promoting insurance in their branches under the CUCPA unless the insurance is related to the core business of the entity, such as creditor, mortgage and travel insurance.

There was confusion in the CU industry, according to FSCO, regarding whether the prohibition includes promoting insurance products online. The Ontario government announced in its 2014 budget that this issue would be reviewed, and the province subsequently held consultations.

The new rules, which take effect on Jan. 1, 2016, aim to provide clarity to CU stakeholders by expanding the in-branch restrictions to apply to websites explicitly.

“We’re disappointed,” says Bob Hague, president of CU distribution with Burlington, Ont.-based CUMIS Group Ltd.

CUMIS, which partners with CUs to provide insurance to CU members, is owned jointly by the Regina-based Co-operators Life Insurance Co. and Vancouver-based Central 1 Credit Union. The latter is the association representing CUs in Ontario and British Columbia.

“We believe all Ontarians should have choice when it comes to insurance, and that includes being able to access it through a credit union website,” Hague adds.

The rules separating insurance sales from banking are intended to deter practices such as tied selling and unfair influence at point of sale. FSCO says the new rules applying to CUs will ensure greater consistency between the promotion of insurance products permitted online and in branches, and will align Ontario’s provisions with those in effect under the federal regime for banks.

In 2011, the federal government took a similar step by amending the Bank Act regulations to clarify that banks are prohibited from promoting non-authorized insurance products on their websites as well as in branches.

However, Art Chamberlain, media relations manager with Central 1, says he is perplexed by the step to apply the bank restrictions to CUs, as CUs in Ontario already face a considerably different set of rules compared with the banks. Specifically, he notes, CUs in Ontario are not permitted to own or operate insurance subsidiaries and, as a result, they do not profit from life insurance and P&C insurance sales the way banks do.

“Banks own insurance companies,” Chamberlain says, “and if they were allowed to have links [to insurance on their websites], they would have links to their own insurance companies. But, especially here in Ontario, credit unions aren’t allowed to own insurance brokerages or insurance companies, so that’s not really an issue.”

The insurance-related information that Ontario CUs have on their websites, Chamberlain says, simply aims to educate CU members about insurance products and, in some cases, provide a link to a third-party insurance provider. For example, many CUs direct their members to CUMIS for their insurance needs.

“The links aren’t taking consumers to companies that we make money from,” Chamberlain says. “Those links on credit union websites are really for the convenience of our members, to direct them to somebody who can sell them insurance.”

Given that many consumers use the Internet as a resource for researching insurance, Hague says, he’s concerned the restrictions will make it harder for people to find information they need.

“Consumers should be able to access insurance through a variety of channels,” Hague says. “[The new rules] restrict one more channel that is widely used now by consumers to research and seek out financial products across the board.”

Beyond simply promoting insurance, some CUs in Ontario would like the ability to operate their own insurance companies and brokerages as subsidiaries. Chamberlain points out that in provinces that don’t have the same restrictions as Ontario, such as Quebec and British Columbia, CUs have had success with insurance sales.

“We see it as a natural fit for credit unions,” Chamberlain says. “People do need insurance, and we would like to be able to sell them a whole suite of things that they need.”

As part of a five-year review of the CUCPA that the Ontario government is conducting, Central 1 has recommended that CUs be given the ability to own insurance brokerage subsidiaries.

“If that were the case,” Chamberlain adds, “we’d certainly be fine with these regulations of not being able to link to brokerages that we own.”

Nonetheless, Allemang says, it’s important to keep insurance separate from banking in order to ensure consumers are properly protected: “We don’t want people to feel that they may be at risk of feeling pressured to purchase products through cross-selling.”

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