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| October 21, 2009: Consumer Rights: Transparency and objective comparisons of life insurance products, including those offered by banks through their virtual branches on the Internet and insert mailers to consumers. |
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At the beginning of October of this year, Finance Minister Jim Flaherty told the banks that selling insurance on their websites “was not consistent with the government’s policy, that insurance activities are not generally to be carried on in bank branches” The advent and evolution of the Internet, especially since the mid 1990s, has created a reality that did not exist before. Whereas prior to the advent of the Internet, bank interface with consumers was largely through their brick-and-mortar branches, the new reality is that the single most active branch of most big banks is not a brick-and-mortar branch but the virtual branch – the bank’s Internet website. For all intents and purposes, the differentiation between a major brick-and-mortar bank branch and the virtual bank branch is minimal at most. Moreover, some banks, including ING, Ally, and Canadian Tire don’t even offer consumers the option of a brick-and-mortar branch or a virtual branch. For these banks, the consumer can only interface with the bank through the bank’s virtual branch. To entice consumers to deal with the bank’s centralized virtual branch, an increasing number of the major banks, including the giants, are offering higher interest rates for investments and lower service charges for general services when the transactions are conducted through the bank’s virtual branch rather than one of their brick-and-mortar branches. Under the Bank Act, and to protect consumers from undue pressure and influence, banks have been held back from selling insurance at their branches since the 1900s. Within the past decade, however, banks moved more deeply into life insurance, offering individual life insurance through their virtual bank branches. In addition to individual life insurance, banks are also offering an increasing range of life insurance products in the form of Certificate Group Insurance (CGI). Over the years, and at an increasing pace over the most recent decade, banks have advertised their virtual branch sold individual life insurance and CGI as being “competitive” and simple and easy to acquire. In some cases the advertising claims have gone as far as to suggest that individual life insurance sold through virtual bank branches is more competitive than the same or similar individual life insurance distributed through commissioned life insurance agents and brokers. Perhaps to inhibit consumers from comparative shopping and reduce competitive pressure, banks fail to cooperate with open disclosure of their individual and CGI life insurance products for independent objective comparisons and evaluations. This appears to be in sharp contrast wit the statement: “We are completely shocked that Mr. Flaherty would want to limit how and where consumers can access information about insurance…” attributed to the Canadian Bankers Association (CBA) in reaction to Mr. Flaherty’s letter regarding sales of insurance through the banks’ virtual branches. The proverbial “facts on the ground” appear to indicate that it is not the prohibition against banks selling insurance through their branches that is limiting competition and where consumers can access information about life insurance product offerings. Rather, consumers should be shocked that the banks would want to limit how and where consumers can access information about their individual and CGI insurance offerings. The question to the banks is “why”? If there is nothing to hide then what is there to hide, and if the banks claim that selling individual and CGI life insurance through virtual branches would increase competition then why inhibit objective and independent comparisons that would include their individual and CGI life insurance product offerings? In effort to avail consumers with increased transparency and access to objective independent comparisons, a new independent module is being added to the LifeGuide Professional Software. This module will include research generated information, including pricing and benefits, relating to individual and CGI life insurance offerings by banks and other financial institutions through virtual bank branches, by mail, and through telemarketing. As noted, the new module is an independent module with its own separate database. One of the main reasons for separation between LifeGuide’s main database of products and product information and the added module’s database stems from the fact that the products and product information in LifeGuide’s main database is sourced directly from the Head Offices of the respective life insurers. As noted, the new module’s database will contain information that is generated by research. In order to facilitate the research, we invite life insurance professionals to forward information that they may receive through mailers and from the “insurance rooms” of the various banks’ virtual bank branches. E.&O.E. |
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