SAN FRANCISCO -- States that bar banks from selling retail insurance products should reconsider their position, the head of the nation's insurance commissioners association said at a conference here this week.

It is "unfair for some groups" to dictate what banks should do, said David J. Walsh, president of the National Association of Insurance Commissioners.

"I think we always need to look at distribution systems to define what is best," he told bankers and insurance industry executives gathered for the fall conference of the Financial Institutions Insurance Association.

Mr. Walsh's words have clout because the state insurance commissioners in his association are responsible for setting policy and carrying out laws related to banks' sales of insurance products, such as annuities and life insurance.

States such as Florida, where commissioner Tom Gallagher is a member of the insurance commissioners group, have long held that banks have no business selling products that independent insurance agents are marketing.

But Mr. Walsh, who is Alaska's insurance commissioner, took a gentler stance, suggesting "a middle ground," where banks may play a role.

"There needs to be a serious look at distribution systems up and down the food chain," he told conference-goers.

State insurance commissioners who don't feel this way will likely come around, he added. "They will see the right course in fairly short order."

Mr. Walsh said that he was not simply playing to his audience of bankers, but that he has also made his position known to members of his association.

The comments drew mixed reactions at the conference, with some bankers grumbling that Mr. Walsh stopped well short of endorsing banks' sale of insurance products.

But other executives were heartened that Mr. Walsh did not shut the door on banks.

"It's significant that he is endorsing the theme of building bridges," said Richard Starr, chairman of the Financial Institutions Insurance Association, Corte Madera, Calif. "I find that encouraging."

Mr. Walsh also drew support for endorsing efforts to streamline applications that insurance companies and investment product marketers must file to enter new states.

"That's a positive approach," said Kevin Crowe, chairman of Essex Corp., a leading marketer of annuities through banks.

But he added that Mr. Walsh "unfortunately doesn't control all the states, including some of the major ones" that have a track record for being uncooperative.

Thankfully, not all states are unresponsive to banks' efforts to sell annuities and life insurance, said Michael White, president of the Financial Institutions Insurance Association.

In fact, Mr. White offered as evidence a new study that shows 23 states give banks broad powers to sell annuities and life insurance products.

Another five states allow banks to sell most annuities, and seven states let them operate insurance agencies in towns of fewer than 5,000 residents.

Mr. White conducted the study this summer by contacting state insurance and banking departments.

Legal actions, including a case the Supreme Court is reviewing, seek to open the doors further for financial institutions.

Once the legal cases are decided, Mr. White said that banks' opponents will not be able to renew their battle by arming themselves with customer complaints against financial institutions.

He said his survey found that charges of coercive or abusive insurance sales practices by banks "are negligible to nonexistent."

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