State insurance commissioners are scrambling to maintain control over banks entering the business.
While some state regulators are looking to Congress for help, others are sitting down with bankers to work out oversight questions.
The Supreme Court's March 26 ruling that national banks can sell insurance from small towns left the power of insurance regulators in doubt.
The court was vague - saying only that states could not prevent or significantly interfere with bank insurance sales.
"Typical of a Supreme Court decision, this raises more questions than it answers," said Lee Douglass, Arkansas insurance commissioner.
Certainly, the Barnett ruling creates some big headaches for insurance regulators. Approximately 20 states have laws either forbidding bank insurance sales or, like Arkansas, restricting sales to people living in the small towns where banks are located. Those laws have to be changed.
In Texas, bankers are worried about rules that require all stockholders of an insurance brokerage to be registered agents - an impossible rule for banks to follow.
To head off future court fights, state insurance commissioners want guidance from Capitol Hill, Mr. Douglass said. "To what extent is state regulation burdensome or discriminatory? That's the stuff Congress needs to address now," he said.
But other insurance regulators are trying to reach agreements with bankers on their own.
In Florida, despite his failed effort to stop Barnett Banks Inc. from selling insurance, state commissioner Bill Nelson is already working on rules agreeable to banks and insurance agents. A spokesman for Mr. Nelson said banks now sell annuities under rules designed by bank and insurance regulators last summer.
"Bill developed a good working relationship with the Florida comptroller and put together guidelines that allowed a smooth transition," he said. Florida will adjust to the Barnett case the same way, he said.
In Indiana, bankers say insurance regulators have been fair since the Supreme Court forced the state to allow bank insurance sales statewide.
"Up to this point there don't appear to be any conflicts as to how this is to be done," said Tom Williams, director of government relations for the Indiana Bankers Association.
But conflicts will eventually arise, said Mr. Douglass, the Arkansas insurance commissioner. Without congressional direction, state's won't be able to set rules, he said.
House Banking Committee Chairman Jim Leach is trying to fill in the gaps created by the Barnett case. As part of his sweeping financial services reform bill, he has carved out the roles states will play in regulating bank insurance sales.
Under his bill states will have the final word in how all sales are conducted, including customer disclosure requirements and licensing rules.
But states would be forbidden from discriminating against banks or interfering with their ability to sell insurance. For instance, states could not make it more difficult for bank employees to obtain licenses.
That's not good enough, say bankers. Under Rep. Leach's plan, the Texas law requiring owners of insurance brokers to be registered agents could remain on the books, keeping banks out of the business.
Rep. Leach should hold off until bankers and state regulators resolve their differences, said Mr. Williams of the Indiana Bankers. "I'm not sure there's a consensus yet," he said.
