Canadian banks ordered to stop selling insurance via web sites.

Canadian banks will no longer be allowed to sell insurance products on their Web sites, according to a new order from Canadian Finance Minister Jim Flaherty. He informed Canada's banking industry--which is not allowed to sell insurance in its individual branches--that it must also stop marketing insurance online.

It's a move welcomed by the Canadian insurance industry. "We think it's a great decision for our consumers of insurance," said Steve Masnyk, spokesman for the Instwance Brokers Association of Canada. "Banks have been using loopholes and gray areas of the regulation to push theft products, despite the law being very, very clear. The law states explicitly and clearly that banks are not allowed to be in the insurance business. Period"

But the banks accused Flaherty of changing long-standing rules. "We are completely shocked that Mr. Flaherty would want to limit how and where consumers can access information about insurance," the Canadian Bankers Association said in a statement. "Further, Mr. Flaherty has taken this step without any public consultations with Canadians or the banking industry."

Masnyk said the Federal Bank Act's regulatory system for the financial institutions is dated. "We're dealing with regulations that had been written in 1991." That time period was well before the rise of the Internet. "The regulations need to be updated in order to fully implement the intent of this law."