WASHINGTON -- The American Bankers Association is close to winning support from key consumer groups for legislation permitting banks to sell insurance nationwide.

In return, the ABA would agree to the inclusion of several consumer safeguards.

The negotiations involve three giant consumer groups: the American Association of Retired Persons, the Consumer Federation of America, and the National Insurance Consumer Organization.

The parties hope to wrap up the negotiations by Labor Day, intending to have compromise legislation ready for Congress to consider next year, said Philip Corwin, who deals with consumer banking issues for the ABA.

Linkage to CRA Compliance

Mr. Corwin said it will be difficult for likely opponents -- such as insurance agents, who have battled to keep banks out of their business - to "to attack [the accord] on the basis of it not protecting consumers."

Any bank in the 50 states and the District of Columbia would be able to sell, but not underwrite, all types of insurance - but only if it scored one of the two highest grades for Community Reinvestment Act compliance. Banks would have to disclose the underwrite of their policies, how much of the premium compensates the bank agent, and quality ratings like those provided by A.M. Best & Co.

Paul Equale, chief Washington lobbyist for the Independent Insurance Agents of America, downplayed the talks.

"We're watching with interest, but we're not going to rush to the alarm bells on this," he said.

The IIAA joined other agent groups in negotiations with a group of major regional banks. Those efforts produced an agreement on legislation that would permit interstate branching in return for some restrictions on bank insurance brokerage.

The ABA's effort to win over consumer group was reported Monday in Bank Letter, a trade publication. Early reaction from the industry was mixed.

"I think it's good idea," said Joe Belew, president of the Consumer Bankers Association. "We have been talking about similar ideas for the past year or two."

But Steve Verdier, a senior lobbyist for the Independent Bankers Association of America, warned that the ABA might be courting the same kind of legislative disaster that befell the industry last year with the Federal Deposit Insurance Corporation Improvement Act.

The 1991 bill had early and broad industry support but was gradually stripped of new bank powers and weighted down with provisions that bankers said resulted in a significant increase in their regulatory burden.

"I wonder if the banking industry might not be better off it it quit going to Congress for the powers that states seem willing to provide for us," Mr. Verdier said. Legislatures in a number of states have authorized bank insurance activity.

Kent Brunette, a lobbyist for the AARP, which endorsed some of the IBAA's legislative agenda last year, suggested that the insurance initiative "would be considered as part of a broader package." Then the senior citizens lobby would try to attach measures requiring banks to cash government checks and offer basic transaction accounts to low-income persons, he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.