BANKS, CREDIT UNIONS AND INSURANCE

There is a rationale among the big banks which the banking industry has shared for many years which concerns the need for banks to provide their customers with a full range of financial products.  The banks and credit unions want their range of financial products to include insurance.  While this may be good for the financial institution, how does it serve the customer, and at what risk? 

Insurance is different from other financial products and while it represents an integral part of responsible financial planning, it is not a commodity that is bought and sold like other financial products.  The acquisition of insurance represents a long-term decision that can have catastrophic implications to families should the purchased product not adequately meet the consumers’ needs.

Insurance brokers and agents are licensed, provincially regulated and specialized in helping their clients find the product most suited to their needs.  They enjoy long-term relationships with their clients – periodically reviewing their needs to ensure the products continue to meet their requirements over time.  In doing so, independent advisors fill an important market niche by providing easily accessible service to clients, often in the client’s own surroundings and outside regular business hours.  It is because of this commitment to customer service that the present distribution channel of insurance successfully endures.  This same personalized attention would be unavailable at a local bank or credit union, and this is a disservice to the consumer.

When is the last time you went into the bank?  The banks would rather have you use the ATM machine than take time to provide you with quality customer service.  When you are afforded the “luxury” of the bank providing personal customer service, the result is service fees which are often undisclosed prior to the transaction.  Your independent insurance broker’s business is driven by customer service excellence.  Quality personal service is the rule rather than the exception.

Competition and choice are what is best for the consumer.  The more competition and choice available, the greater the advantage is for the consumer.  The big six banks already dominate Canada’s banking sector.  The result:  Canada’s banking sector is one of the least competitive banking sectors in the world.  Despite legislation that was introduced in 2001, Canada’s banking sector remains extremely uncompetitive which is extremely detrimental to the consumer.   If allowed to enter the insurance sector, the banks would offer no choice of different products which would ultimately suit the banks needs for further record profits.  Your independent insurance advisor offers unbiased choice and a selection of multiple products.  The emphasis is on consumer needs rather than the “bottom line.” 

To get the best service and interest rates from your bank, you must be a “preferred” client or haggle and negotiate to get fair treatment.  The ability of a bank or credit union to link a consumer’s debt or credit situation to the purchase of insurance opens the door to the practice of coercive tied selling.  Banks and credit unions already have access to a great deal of personal and financial information relating to a customer by virtue of their banking arrangements, and even more so when a lending arrangement exists. 

The only way to protect consumers from coercive tied selling and the inevitable conflicts of interest that will arise between the lending and “investment” sides of the financial services industry is to keep the sale of insurance out of bank and credit union branches.

What can you do?  As a consumer, you can express your concerns to your local member of parliament, both provincial and federal.  Do not assume that someone else will do this for you, act now to protect your best interest!