During his keynote speech on June 17 that closed the 2006 Advocis national conference in Victoria, Paul Desmarais Jr., chairman and co-chief executive officer of Power Corporation of Canada, called on Canada’s financial advisors to keep up their grassroots lobbying efforts on the federal government to prevent any policy changes that could lead to the emergence of bancassurance in Canada.
As the owner of Great-West Life, Canada Life and London Life, Power Corp.’s core business is insurance, Mr. Desmarais said advisors should be vigilant with respect to the current debate on whether banks should be permitted to provide more insurance products and services through branches and whether mergers between large banks and insurers should be allowed.
A federal white paper released in June, the 2006 Financial Institutions Legislation Review: Proposals for an Effective and Efficient Financial Services Framework, made no mention of allowing banks increased marketing powers in their branches to promote insurance products. The Canadian Bankers Association (CBA) has been lobbying hard to obtain this right for its members while the insurance industry has been very vocal opposing such a change.
Mr. Desmarais looks on the fact that the white paper did not discuss the issue as positive news for the insurance industry. He warned, however, that financial advisors can be assured that banks will continue to lobby aggressively to win expanded powers.
“I can guarantee you, they will not roll over…We have a fight on our hands.”
The Bank Act is currently under review. A decision on any amendments is expected next spring.
“We have to follow these developments and ensure that the government understands our position,” he told the hundreds of advisors who attended his speech. “This is no time for the life insurance industry to relax.”
Mr. Desmarais told the audience that advisors have a key role to play in convincing the government to maintain the status quo. The influence of individual advisors talking with their Members of Parliament and with other leaders in their communities, is the most powerful weapon that the insurance industry has in its arsenal. “Don’t think it is done at the top…the most influential and important people in terms of this particular legislation are you people,” he told the crowd.
Mr. Desamarais stressed that a policy change that would permit mergers between large banks and demutualized insurers could result in the loss of the independent life insurance sector in Canada.
What impact would bancassurance have on life insurance agents and brokers? “The blunt answer is that mergers would no doubt disrupt the multi-channel distribution system that has served individuals and groups of Canadians well in all regions,” he said, adding, “bancassurance has clearly had a devastating impact on the delivery of life insurance products in the European countries where it was introduced.”
Quoting from a study that looked at the market in France where the banks' share of life insurance sales is now at approximately 60%, Mr. Desmarais said the number of agents plunged by 50% during the 1990s. He predicts that the emergence of bancassurance in Canada would also threaten the livelihood of many agents and brokers, including many of whom presently serve smaller communities that banks are abandoning.
During a question and answer period, Mr. Desmarais gave advisors a tip on how to effectively get their message across to their MPs. He suggested advisors ask their MPs to reflect on difference in the power balance between a bank manager and a consumer taking out a loan, versus the power an insurance advisor holds over his clients. When someone is asking for a loan they are on their knees and likely very willing to tick off a box to purchase insurance if the bank manager suggests it, he explained. Insurance sales reps, on the other hand, do not exert such power over their clients. He suggested that the advisor ask his MP: “when was the last time that he was on his knees in front of an insurance salesman who was trying to sell him an insurance policy? Never! You know who was on his knees – the insurance salesman.”