Massachusetts moved a step closer to allowing banks to sell annuities and insurance policies.
An advisory committee of the state's secretary of consumer affairs and business regulation issued a report recommending that the state offer licenses for banks to sell these products.
Currently, banks in Massachusetts - with a few exemptions - are not allowed to sell insurance products.
"The committee believes there would be benefits to the public by opening the competition of insurance sales to banks," the study reported.
It added: "The consumer will have a greater choice both in product and in sources of information and distribution channels such as branches, automated teller machines ... telephone systems."
The recommendations were presented to Priscilla Douglas, the state's secretary of consumer affairs, by a three-man committee headed by Alan R. Morse Jr., a former commissioner of banking for the state.
Mr. Morse's committee is also recommending that the state's insurance commissioner oversee insurance sales from banks, rather than a banking regulator.
"Our regulatory activities should be organized in a way that is consistent with changes taking place in the industry," he said.
The report was prompted by Massachusetts' effort to stay abreast of a trend among financial services firms in which various banks, brokerage houses, and insurance companies are entering each others' businesses.
Consolidating oversight of the financial services industry will make the "playing field more level" for banks, insurance companies, and other financial service companies, Mr. Morse said.
He said the consumer affairs agency is currently finalizing proposed legislation, which it will soon hand over to Gov. William Weld for review.
The financial services industry is one of the state's most important, employing as many as 170,000 people.
Needless to say, banks responded positively. "It's wonderful," said Donald McGowan, president of Flagship Bank and Trust Co., Worcester.
Mr. McGowan, who is chairman of the Massachusetts Bankers Association, expected that the state Legislature would side with the banking community in spite of vocal opposition from traditional insurance agents.
Some banks in Massachusetts have been positioning themselves for changes in the law.
Most notably, Fleet Financial Group snared a senior executive and 19- year veteran from Travelers Insurance Corp. to oversee the superregional bank's entrance into the insurance business.
States are reviewing their banking and insurance laws, and many are easing up on banks. States that already permit them to sell annuities include Maine, Vermont, New Hampshire, Rhode Island, North Carolina, and Florida.
And a Supreme Court ruling early this year, NationsBank of North Carolina v. Variable Annuity Life Insurance Co., confirmed that banks with national charters can sell annuities under federal banking laws.
Some Massachusetts banks have found several legal loopholes that allow them to sell them insurance products. Banks, for example, are allowed to rent space out to independent agencies. In addition, for 80 years they have been allowed to sell savings bank life insurance, an inexpensive form of term insurance and annuities.
