Pennsylvania Governor Thomas Ridge signed a law last week allowing state banks to sell insurance for the first time.

Enacted Wednesday, the law places no restrictions on where state- chartered banks must base their insurance sales operations.

National banks, on the other hand, are required by federal law to base insurance agencies in small towns, though they may sell the products anywhere. The Pennsylvania law also contains several consumer protection provisions.

The most stringent requires insurance to be sold in a part of the bank separate from the lending and deposit-taking areas. However, the Pennsylvania insurance commissioner may exempt banks with lobbies that are too small to effectively separate their insurance and traditional banking operations.

Pennsylvania banks also are prohibited from conditioning a loan approval on the purchase of insurance under the law.

Kathleen W. Collins, Washington counsel for the Financial Institutions Insurance Association, said the consumer restrictions contained in the new law are relatively light.

"Of the states that thought they needed to develop across-the- board laws, this is probably one of the best ones that has come out of this legislative season," Ms. Collins said. Nevertheless, Ms. Collins questioned the need for any additional consumer protections.

"In states that have allowed insurance sales for decades, there has been no indication that bank agents selling these products have had problems," she said. "This is just adding on another layer of law."

Bills that would allow state-chartered banks to sell insurance are pending in Massachusetts, New York, and New Jersey. An Illinois insurance bill is awaiting the governor's signature.

J. Bradley Scovill, president and chief executive of Bank of Hanover (Pa.) and Trust Co., said the law finally enacted is much better than the original legislation, which would have seriously hampered bank insurance sales.

"We started off with legislation that was full of restrictions and ended up with a law that gets us into the insurance business with more flexibility than national banks," Mr. Scovill said. Mr. Scovill said the consumer protections are not a problem. "We don't want our customers to be confused, so we thought this was a good idea," he said.

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