Draft guidelines for bank insurance sales were released Thursday by the Office of the Comptroller of the Currency, drawing immediate praise from bankers and legal threats from insurers.
Under the guidelines, banks must follow state licensing and training laws. But the agency said it will preempt any state law that "frustrates, hampers, impairs, or interferes" with a national bank's ability to sell insurance.
The guidelines also reinforce anti-tying rules, which prevent bankers from basing a credit decision on whether a consumer buys insurance from their institution. Finally, the agency details management's responsibilities and the scope of examinations.
Banking industry officials lauded the draft, saying it provides guidance without increasing regulatory burden. "They have done a nice job of not requiring any specific things," said Karen Thomas, director of regulatory affairs at the Independent Bankers Association of America. "Rather they provide advice to bankers about what they should be thinking about."
Ms. Thomas noted that the draft is similar to best-practices guidelines endorsed by the five major banking and thrift trade groups.
Insurance industry officials condemned the draft, saying it does little to protect consumers.
"This stuff is litigation bait," said Phil Anderson, director of federal affairs for the Independent Insurance Agents of America.
Mr. Anderson said the Comptroller's Office is asserting authority to void any state law it wants. "Members of Congress will recognize that this is an egregious overstep," he predicted.
The agents will do what it takes to block these rules, he vowed. "We are not going to be able to sit by and let this stuff go through."
The draft barely mentions customers, noted Dean Sackett, vice president of government affairs at the National Association of Professional Insurance Agents. "This should be guided by consumer protections, not by what is best for banks," Mr. Sackett said. "It puts the whole analysis under suspicion."
The Comptroller's Office has been working with a group of state insurance commissioners on these guidelines. Arkansas Insurance Commissioner Lee Douglass, one of the state regulators involved in the negotiations, declined to discuss the draft in detail. But he said his group will meet with officials from the Comptroller's Office shortly to air its concerns.
Most of the guidelines address management's responsibilities for insurance sales. Bankers are expected to ensure that any underwriters they work with are legitimate. Also, banks should only sell insurance through licensed personnel.
The Comptroller's Office also warned banks not to allow salespeople to sell consumers policies they don't need. This practice, known as churning, inflates commissions without providing consumers any benefits.
Also, the agency said banks should establish a procedure for handling consumer complaints and for ensuring the confidentiality of a consumer's records remain confidential. It noted that many banks won't release information about a customer's health to other affiliates without the person's consent.
The agency also said bankers should sell insurance and deposit products from different areas within the bank's lobby. Also, it said institutions should limit teller involvement with insurance sales. These efforts should reduce consumer confusion, the agency said.
The agency wants to receive comments on the draft over the next several weeks, and may revise it before issuing final guidelines. Banks are expected to begin complying with the guidelines next month.
