Removing a long-standing obstacle to broad financial modernization, the Independent Insurance Agents of America on Thursday endorsed legislation to let banks and insurance companies to own each other.
"This group has opposed bank entry into the insurance field for over 100 years," said Paul Equale, the IIAA's senior vice president of government affairs. "We are now saying that affiliation of banks and other financial institutions should move forward."
Though the trade group removed another important barrier to legislation that would let banks, insurance, and securities firms enter each other's businesses, the industry disputes that have hamstrung lawmakers for decades are far from over.
Mr. Equale said his organization will fight to ensure that states are allowed to pass consumer-protection rules. "We believe it's the right and duty of states to enact consumer laws," he said.
However many bankers fear that states will interfere with their insurance business. For instance, some states may prohibit bank loan officers from selling insurance.
"We still have some difficult issues to be dealt with in terms of state regulation," said Edward L. Yingling, chief lobbyist for the American Bankers Association.
Nevertheless, he called the IIAA announcement a "positive sign" that a broad modernization bill could be passed during the next two years.
In the last Congress, the agents' efforts to roll back bank insurance powers stymied legislation sponsored by House Banking Committee Chairman Jim Leach.
But Thursday Mr. Equale endorsed a new financial modernization bill introduced by Rep. Leach two weeks ago. He also predicted his group would support additional proposals now being drafted by Senate Banking Committee Chairman Alfonse M. D'Amato and the Treasury Department.
"The entire financial services industry is now operating from same set of principles, it's fairly remarkable," said Mr. Yingling. Last year, trade groups for securities and insurance companies announced their support for industry affiliation.
The endorsement from the agents came as little surprise; the group had announced in October that its board of state directors would rethink its long-standing opposition. Still, the agents' leaders seemed surprisingly conciliatory to their longtime rivals in the banking industry.
For instance the IIAA president, Ronald A. Smith, called on banks to set up joint ventures with insurance agents.
"To banks we say: Come talk to us," he said in a prepared statement. "If you want to sell insurance, come talk to the insurance experts. Additionally, many IIAA member agencies want to explore offering your products to our customers."
Mr. Equale acknowledged that recent court decisions and banks regulators forced his group to act. "It was our responsibility to adapt," he said.
Last year the Supreme Court dealt the agents a blow when it ruled national banks are allowed to sell insurance from small towns. Banks got another boost when the Comptroller of the Currency let them add new activities through operating subsidiaries.
"For our members to maintain a leadership position in delivering insurance and other financial products, we had to look at the next 50 years of insurance regulation, not the last 50 years," Mr. Equale said.
Mr. Yingling said the courts and regulators have put banks in a strong position to fight off unwanted state rules. "We don't have to have a bill in this Congress, though we want to work for one."