New way for banks to dodge Bank Act prohibitions regarding insurance

Canada’s mutual insurers are concerned about new provisions in Bill C-74, tabled last week in the House of Commons, that could indirectly allow banks to share their information with insurance companies, currently disallowed under the Bank Act.

Bill C-74 authorizes banks to share data with unregulated entities such as fintechs. In addition, it authorizes banks to control fintech entities whose main business is “financial services.”

Under Bill C-74, nothing prevents banks from sharing their information with fintechs, the Canadian Association of Mutual Insurance Companies (CAMIC) warns. And nothing prohibits the unregulated fintech from passing along the bank’s information to an insurance company (whether owned by the bank or not).

What banks are prohibited from doing in one step under the current regulations, they will be allowed to in two steps under the proposed bill, says CAMIC president Normand Lafreniere.

“What we fear is that [Bill C-74] will give [banks] the opportunity to share information that is contrary to what is allowed right now with respect to insurance information,” Lafreniere told Canadian Underwriter in an interview Wednesday. “Basically, private information from the banks to insurance companies is disallowed as we speak, but that could be done by the back door, as opposed to the front door, under the new legislation. That is what we are against.”

Currently under the Bank Act, with few exceptions, banks cannot provide their customer’s banking information to any insurance provider, including subsidiaries. The rules are designed to protect consumers from feeling pressure to accept the bank’s insurance at the point of sale instead of exploring other options.

Lafreniere told Canadian Underwriter that CAMIC recently took its concerns about the bill to Canadian Finance Minister Bill Morneau’s office.

“We met with the department of finance, and we tried to get the assurance that that would not be done, and they told us that this is not their purpose,” Lafreniere said. “Their purpose is not to go against the intent of the Bank Act to protect consumers from being forced to buy the [bank’s] insurance. But we didn’t get the assurance that indeed they would [enshrine the Bank Act protections into Bill C-74]. Therefore, we are against legislation that would not maintain the same protection that we have under the current legislation.”

CAMIC represents 78 mutual insurers across Canada who insure homes, cars, and commercial enterprises. Mutuals represent over 20% of the entire P&C insurance sector.

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.