Sept., 2012 – The United Kingdom should follow Canada and prohibit banks from selling general insurance products, says the head of the British Insurance Brokers’ Association (BIBA).
BIBA Chief Executive Eric Galbraith issued a statement last week following a speech from the Financial Services Authority’s (FSA) managing director Martin Wheatley. In the speech that called for an end to “poorly designed” incentive schemes, Wheatley said financial services professionals are too often “viewing consumers simply as sales targets.”
“Some time ago, financial institutions changed their view of consumers from people to serve, to people to sell to,” Wheatley said in his speech. “One of the reasons why this happens is obvious – people in our financial institutions are being encouraged to sell to us through incentive schemes, bonuses and rewards. We have found evidence of poor practice and we are concerned that this reward culture is contributing to mis-selling.”
“The FSA’s announcement is a step towards recognising the role that banks have played in the mis-selling of financial products, however the FSA could explore the merits of adopting a similar approach to Canada where banks are prevented from directly selling general insurance products altogether,” said Galbraith’s statement. “Our sector has been tarnished by the practises of other institutions, whose main business is not insurance and have mis-sold insurance products. Banks and other organisations should focus on their core business and not be allowed to directly sell general insurance.
“I agree with Mr Wheatley that ‘all of us need a strong, profitable financial services industry that can give us the advice we need to guide us’ however, this will not be achieved on general insurance unless the regulator recognises that advice is the area of the professional insurance broker and intermediary whose business is insurance and not a bank or other organisation whose main business is not insurance,” he added.
In Canada, certain types of insurance related to credit and travel have been authorized for sale in bank branches, but banks are prohibited from advertising the non-authorized insurance products like life and P&C products, in their offices. They are allowed to set up separate locations to sell that type of insurance. In May 2010, Ottawa introduced legislation that would ban banks from using their websites to promote insurance that can’t be sold in branches.
