OSFI ruling: A bank website is not a branch and can sell insurance

June 30, 2009

After months of speculation and debate, the Office of the Superintendent of Financial Institutions (OSFI) ruled that a bank’s website is not a branch, and, as a result, can promote and sell insurance products or services on its website.

The Bank Act specifies that a bank must sell insurance in a building that is separate and distinct from its bank branches.

After complaints from policyholders and brokers that a separation did not seem to exist online, the Insurance Brokers Association of Canada (IBAC) asked OSFI to clarify the issue—whether or not a bank that promoted and sold insurance through its website constituted a breach of the Bank Act.

In a ruling posted on June 30, OSFI says that the Bank Act’s definition of “branch” refer to physical premises.

“Furthermore, there are numerous provisions in that statute that specifically distinguish a Web site from being a branch,” the ruling says.

The definition of a "branch" under the act is as follows: (a) in respect of a bank, means an agency, the head office or any other office of the bank, and; (b) in respect of an authorized foreign bank, means an agency, the principal office or any other office of the authorized foreign bank in Canada at which is carried on the business in Canada of the authorized foreign bank.

“OSFI concluded that, for purposes of the regulations, a bank website is not a bank branch,” the ruling says.

“As a result, a bank may, on its website, promote in Canada any insurance policies or any insurance companies, agents or brokers, subject to the conditions that the regulations impose on such promotion outside a branch.”