Monday, March 13, 2006

Fédération is Quebec's Top Financial Institution

The Toronto Star, Stuart Laidlaw, 13 March 2006

Hull, Que.—The details of Jean Bruneau's daily business dealings are the stuff of dreams for a man like John Ebsary.

In an office overlooking the nation's capital, the branch manager for the Desjardins credit union describes how two dedicated insurance salespeople sell policies at the branch, and how his and 12 other credit unions work together to boost business lending.

"We are really taking business away from the banks," says Bruneau, whose branch on a windswept hill on the Quebec side of the Ottawa River is the gold standard for Ontario credit unions.

Ebsary, his office tucked beside Highway 417 as it cuts through downtown Ottawa, oversees a very different credit union.

He can't sell insurance from his branches. And his ability to take on business loans is limited — especially in rural areas where agricultural lending requires special registration with the provincial government.

"Farms are big businesses," says Ebsary, who recently oversaw the opening of branches in the rural Ontario communities of Williamsburg and Cardinal.

"We'll start off with smaller farms and work our way up."

Starting off small and working up is something of a mantra these days in the Ontario credit union movement.

In the process, Ontario credit unions are turning their eyes to branches like the one run by Bruneau, and for good reason.

Quebec's caisse populaires began small, but grew to be the top financial institutions in the province. The first was opened in Levis in 1901 by Alphonse Desjardins, and did $26.40 in business its first day. Others followed, and formed a fédération shortly after Desjardins' death, using plans he left behind.

By the 1960s, with Quebec's Quiet Revolution in full swing, caisse populaires were doing $1 billion a year in business. And, as banks and insurance companies moved offices out of the province at a time of growing Quebecois nationalism, the caisse populaires was there to pick up new members.

"It wasn't good for the banks' business, but it was good for us," observes Bruneau.

There are now 568 caisse populaires, all members of the Desjardins fédération, with more than 1,400 branches and 39 per cent of the Quebec mortgage market. In 2005, they had profits of more than $1 billion for the second year in a row.

Since 1999, the Quebec government has allowed caisse populaires to sell insurance through their branches — giving them an advantage over the banks, which are restricted by federal law from doing the same.

In Hull, as in all caisse populaires, the insurance is sold through Desjardins-owned company Desjardins Assurances Générales Inc. by agents who only sell insurance.

"We give them an office, desk, telephone, everything," says Bruneau.

Desjardins vice-president Lucie Bouchard, who is in charge of partnerships between the fédération's operations, says the relationship between the insurance agents and the caisse populaires is much like that of a tenant and landlord.

"People working on the insurance are employees of the insurance company," not the local branch, she said in a telephone interview from Montreal.

Bruneau says loan officers, after negotiating a car loan or mortgage, refer borrowers to the insurance salespeople. The arrangement netted the branch $85,000 last year for referring 650 customers to the two insurance salespeople, he says.

Marie-Josée Lajoie, one of the insurance salespeople, says Dejardins customers do not get any special deals on their insurance. Rates for them are based on predetermined risk factors, as they are for all potential customers, she says.

"We offer no rebates if you have a loan," she says. "I insure lots of people who are not members of the caisse populaires."

She estimates that 80 per cent of her business is conducted by phone, as customers call around to insurance companies comparing quotes.

Bruneau said his loan officers, likewise, do not offer special loan rates if a customer agrees to purchase Desjardins insurance.

"We never did a deal like that. It's two different things."

Tied selling has been the major argument against allowing banks or credit unions in Ontario to sell insurance from their branches.

But Bruneau says an arrangement such as his — with insurance sold from a different office in a separate transaction from the loans — helps prevent tied selling.

But having insurance and banking under one roof does offer Desjardins members a convenience that banking customers across the Ottawa River in Ontario do not have, he says.

"People don't have a lot of time, so it's important to have everything under one roof."

Bill LaBerge would agree. He runs a grocery store in Cardinal, Ont., on the St. Lawrence River shore.

The only financial institution in town is a Your Credit Union branch. He does all his banking there, but must drive to Morrisburg, 22 kilometres away, for insurance.

He says it would be better for him if he could buy his insurance at the credit union branch two doors down the road, and better for the community since the money would stay in Cardinal. It's a service Ebsary would love to be providing.

"There are locations like Williamsburg and Cardinal where there isn't a lot of choice for our members," he says.

But just as Ontario's credit unions have been lobbying the Ontario government — which makes up the rules governing co-operative lenders in the province — to let them sell insurance through their branches, the big banks have been pushing Ottawa to let them do the same.

"It will eventually come," Ebsary says of in-branch insurance.

"Our fear is that the banks get the opportunity before we do."

At the moment, Quebec's caisse populaires have the advantage in that province, since they can sell insurance, while banks cannot.

With their strong presence in the province, Quebec's caisse populaires are also in a stronger position to offer business loans than their Ontario cousins. In Hull, for instance, Bruneau works with 12 other caisse populaires to offer loans to businesses looking to set up or expand in the area.

But in Ontario, credit unions have a tougher time under provincial regulations setting up such syndicates to offer large business loans, limiting their ability to crack that market. Bogach is confident regulatory changes, expected within the year, will fix that.

"There doesn't seem to be a lobby group against that."