Finance Minister Jim Flaherty said Thursday he will tighten regulations to limit the ability of Canadian banks to sell insurance online.

In a letter to the Canadian Bankers Association, the minister said the new rules will prohibit banks from selling non-authorized insurance on their websites. Banks will also be banned from using their websites to link to sites of subsidiaries that sell non-authorized insurance.

Flaherty said the new regulations will clearly distinguish between authorized financial products, such as credit and travel-related insurance, and non-authorized products, such as life, property and casualty insurance.

"Our job is to make sure there's a level playing field for the distribution of insurance products," Flaherty told reporters in a conference call from Peru, where he was meeting finance ministers from the Americas and the Caribbean.

The question of which financial products Canadian banks should be able to sell has been a subject of vigorous debate for decades. In the early 1990s, as part of a series of federal reforms that knocked down the traditional walls between banks and insurers, the federal government allowed banks to operate insurance arms, on condition they didn't sell insurance products at bank branches.

But with many Canadians now doing their banking online, the definition of what constitutes a "branch" has become less clear. Several of Canada's biggest banks currently advertise insurance on their websites.

Royal Bank of Canada's personal and business banking site, for example, contains an "insurance" heading that allows visitors to get more information on RBC's travel, mortgage and loan insurance products. A link called "more insurance information" takes visitors to the home page of RBC Insurance, where they can find out about life, home and auto insurance.

Under the proposed rules, RBC will be able to link to its insurance subsidiary, but only from RBC's corporate home page, rather than its personal and business banking site.

Last October, Flaherty warned the banks he was prepared to bring in tougher regulations if banks did not stop promoting non-authorized products on their sites.

In his letter released Thursday, Flaherty said the changes "were made necessary by evolving use of technology by banks."

The letter was also sent to the Insurance Brokers Association of Canada, which has lobbied the government to clamp down on the banks, as well as the Trust Companies Association of Canada. The new rules also apply to federally regulated trust and loan companies.

A spokesman for the Canadian Bankers Association said individual banks "will be reviewing these new rules to determine how they will affect their own online operations and what they need to do to comply with the rules."

"Our position has always been that consumers benefit when there is choice and competition in the insurance market, and we are concerned when restrictions on that choice and competition harm consumers' interests. That said, clearly banks in Canada comply with all aspects of the government's insurance regulations," spokesman Andrew Addison said in an e-mail.

However, a spokesman for the Insurance Brokers Association said the decision both "protects and empowers consumers."

"The minister is to be recognized for extending consumer protection to the Internet, as this is simply an extension of the branch," spokesman Steve Masnyk said in an e-mail. "The rules are currently silent when it comes to the web, and he is making sure the correct ones for consumers are in place."