A coalition of trade groups is arguing that banks may sell insurance in large cities provided they operate at least one branch in a small town.

The coalition includes the American Bankers Association, the Bankers Roundtable, the Association of Banks in Insurance, and the Missouri Bankers Association.

Writing in an April 4 brief, the coalition said the National Bank Act has never required every bank insurance agency to be located in a small town.

"Just as the courts ... did not impose restrictions on the location of the banks' insurance customers because no such limitation actually appeared in the statute itself, so too the courts should not impose limitations upon the location of the banks' insurance agency offices," the coalition wrote.

The brief was filed in a case brought by the American Council of Life Insurers against the Office of the Comptroller of the Currency. The suit charged the agency abused its discretion when it gave Magna Bank of Missouri permission in November 1995 to keep insurance agencies in large towns that it legally operated before converting from a state to a national charter.

The coalition also charged that ACLI lacks standing to sue the OCC in the Magna case. In order to have standing, a trade group must show that a decision directly harms its members. ACLI fails this test because its members are insurance companies while Magna is an insurance agent, the coalition charged.

"This is not a mere semantic difference," the coalition wrote. "There is a clear and real difference between companies and agencies. Insurance companies are those that underwrite policies, collect premiums, and assume risks, not those companies that merely sell the product of insurance companies for fees and commissions."

-Jaret Seiberg

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