Updated: Mar 23
In this article, I will talk about if banks sell insurance
When did the banks start to sell insurance?
Since the passage of the Gramm-Leach-Bliley Act in 1999, in US, and Bank Act in Canada most consumers and business owners have been able to buy a wide range of insurance products from their banks, for everything from life and health insurance to auto, property, and business coverage.
What could be the Benefits?
1. Banks are able to serve an underserved market. Many middle and lower income Canadians are vastly under-insured and it’s not usually economical for a broker or captive agent to sell a small policy to a middle or low-income Canadian.
2. It creates convenience for the consumer. Many consumers like the idea of being able to walk into a local bank and purchase life insurance.
3. Salaried agents are able to offer insurance solutions in a low-pressure environment. Theoretically, this makes it easier for customers who want to buy insurance and they are more apt to buy in this environment.
What are the cons?
1. The increased likelihood of “Tied selling”, which is the coercion of a consumer into buying an unwanted product, as a condition of buying a product they do want. For example, a bank might only set up a consumer’s mortgage if that customer purchases mortgage insurance as well. This action is illegal and works against the consumer.
2. More impersonalized service. This is especially true when insurance is sold through a web-based bank application.
3. Loss of jobs. Although this may not be a direct concern to the consumer, if the big bank were to take over a significant portion of the Canadian life insurance market, that takeover would likely translate into sizable job-loss.
4. The bank employees and any captive agent have fiduciary duties to their employer only and not to the clients, opposite to a broker who have fiduciary duties to their clients only.
What do you think? Should the banks be able to sell life insurance?
Weigh-in below with a comment.
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