Agents Ponder Appeal Of Bank Ruling

Washington

Insurance agent groups are evaluating whether to file a legalchallenge against a determination by the Office of the Comptrollerof the Currency preempting parts of a West Virginia law regulatingbank insurance activities.

Maria Berthoud, senior vice president of federal affairs for theAlexandria, Va.-based Independent Insurance Agents of America, saidthat IIAA is committed to trying to overturn the OCCs determinationand is trying to build a coalition with other agent groups to filea legal challenge.

She noted that the OCCs decision would affect bank insurancelaws in 19 states that have provisions similar to those in WestVirginia that the OCC said should be preempted.

David Winston, vice president of government affairs for theNational Association of Insurance and Financial Advisors in FallsChurch, Va., said that NAIFA is considering litigation. He saidthat NAIFAs executive committee is evaluating all the pros and consof pursuing litigation and will make a decision after their reviewis complete.

Bank insurance representatives, meanwhile, praised the OCCsdetermination.

Beth L. Climo, executive director of the Washington-basedAmerican Bankers Insurance Association, called the action “apositive development for banks and consumers of insurance.Itensures that banks can offer insurance products to consumerswithout improper interference or discrimination by a state. It alsoprovides a useful roadmap for state regulation of bank insuranceactivities.”

The OCC issued an opinion on Oct. 3 that four provisions of WestVirginias Insurance Sales Consumer Protection Act either “preventor significantly interfere” with bank insurance activities and thusshould be preempted under the Gramm-Leach-Bliley Financial ServicesModernization Act. These include:

A requirement that financial institutions use separate employeesfor insurance sales.

A timing restriction that bars banks from soliciting loancustomers for insurance until after the loan has been approved.

A restriction that bars bank affiliates from sharing informationacquired in the course of a loan transaction or insurancesolicitation.

A requirement that insurance activities be physically separatefrom deposit-taking and loan activities.

However, the OCC also upheld three provisions of the WestVirginia law. These include:

A prohibition against requiring or implying that the purchase ofan insurance product from the financial institution is a conditionof a loan.

A prohibition on a bank offering an insurance product incombination with other products unless all the products areavailable separately.

A requirement that insurance and loan transactions be completelyindependent and thoroughly separate documents.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, October 15, 2001.Copyright 2001 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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