Rhode Island has enacted a law banning bank employees involved in lending and deposit taking from selling insurance.
The law, signed Wednesday night by Rhode Island Gov. Lincoln Almond, closely adheres to a model "consumer protection" bill written by the Independent Insurance Agents of America. It also requires insurance activities to be conducted in a "physically separate" part of the bank and prohibits the use of nonpublic customer information in marketing insurance products.
Bank lobbyists tried to convince Gov. Almond to veto the measure, which they consider an attempt to give insurance agents an unfair advantage.
"The notion that this is consumer protection is a smokescreen," said Matthew H. Street, associate general counsel for the American Bankers Association. "This will hurt consumers because it preserves the current inefficiencies of the agency system of insurance distribution."