Stepping up a battle with banks, Florida's Department of Insurance has issued a strongly worded warning to agents who offer insurance products in bank branches.
In a newsletter distributed this month to insurance agents throughout the state, the department warned that it may take disciplinary action against agents who solicit annuities or life insurance business on bank premises.
Citing state law and rules, the department said agents "should not be meeting with clients or prospective clients anywhere on a bank's premises . . . for any purpose related to the sale or servicing of insurance."
The prohibition covers sales meetings in "space leased from a bank but within the bank," the department emphasized. Agents who willfully violate the rules could have their licenses suspended or revoked, it said.
A banking trade group official said the insurance department's newsletter notice, which was printed under the headline, "Agents Associated With Banks Warned," is bound to have a chilling effect on bank sales of insurance in Florida.
If the department delivers on its warning, "it will make it very difficult to manage programs," said Richard Starr, chairman of the Financial Institutions Insurance Association, Corte Madera, Calif.
"I don't know if banks will have the stomach to fight the commissioner," he added.
Reached for comment, deputy insurance commissioner Doug Shropshire said life insurance sales are expressly prohibited in bank-based programs.
Asked whether the prohibition also covers annuities, Mr. Shropshire replied: "Our position is that prevailing case law states that annuities are insurance, and therefore subject to the same laws that govern insurance products."
Florida is seen as a key battle-ground in the fight between banks and insurance agents.
The state's insurance commissioner, Tom Gallagher, has been sparring with banks for years over insurance sales. But in recent months the fight has escalated, with the department challenging the legality of two separate initiatives by Barnett Banks Inc., Jacksonville.
The department is currently fighting in court to end an annuity sales program that James Mitchell & Co. operates in Barnett branches.
It is also challenging Barnett's acquisition last year of an insurance agency in a small Florida town. The Office of the Comptroller of the Currency, which approved the purchase, has held that banks may sell insurance from towns with 5,000 or fewer residents.
