Insurance industry representatives urged state lawmakers Friday to accept federal legislation allowing insurance firms to merge with banks.
"We must be able to compete effectively," Gary Hughes, chief counsel for the American Council of Life Insurance Companies, told the National Conference of State Legislatures.
Because national banks already have the power to sell insurance from small towns, insurance companies need authority to offer banking products, he said.
Mr. Hughes criticized a resolution under consideration by the state legislators group opposing federal legislation that would preempt any state insurance law. The resolution is particularly worrisome to the industry, he said, because a handful of states have laws forbidding affiliation between banks and insurance companies.
"I think you'll find there's very little support for these laws," Mr. Hughes said. "Where the courts have looked at them, they have been struck down."
Mr. Hughes said states and the insurance industry must remain united as Congress considers sweeping financial reform legislation. Several proposals introduced on Capitol Hill would let banks affiliate with insurance and securities firms.
The industry executives also attacked state laws that prevent mutual insurance companies from converting to stock ownership. These laws will prevent many insurance companies from acquiring banks, they said.
If states oppose a "surgical" preemption of industry mergers, they are more likely to face federal intrusion on other issues, such as consumer protection laws, added Craig Berrington, general counsel for the American Insurance Association, which represents property and casualty companies.
"Some type of federal preemption will be part of the deal," Mr. Berrington said.
State officials, however, were unconvinced.
"Isn't this just a toe in the door opening up to further preemption of state regulation?" asked Arkansas Rep. Myra Jones.
"This is probably the greatest challenge we have faced," said George Nichols, Kentucky insurance commissioner. "There should be no need for any federal preemption." u