First Union Corp. won wide latitude Wednesday to market and sell insurance from a small-town base.

The Office of the Comptroller of the Currency is requiring First Union to process insurance applications and pay agent commissions from a town with fewer than 5,000 people. But beyond such administrative functions, First Union agents would have few restrictions.

They could sell insurance policies to customers anywhere outside the small town, including in branches of First Union National Bank.

Developing one of banking's most ambitious insurance programs, First Union is marketing a wide range of policies through branches, telemarketing, and electronic networks.

The Comptroller's long-awaited ruling confirms First Union's ability to extend that effort throughout its branch network, and potentially nationally, and indicates similar authority is in the offing for other banks.

"National banks selling insurance ought to be treated the same as any other type of insurance agent," OCC Chief Counsel Julie L. Williams said in an interview. "If an agent not affiliated with a bank has marketing flexibility, a bank agent ought to be allowed the same options."

The regulatory ruling "represents a major victory for consumers, as more competition will result in increased insurance products and services, more choices, greater convenience, and lower cost," said David de Gorter, senior vice president and head of First Union's insurance group.

Others representing the banking industry were jubilant.

"It's time to go sell insurance," said Kathleen W. Collins, Washington counsel for the Financial Institutions Insurance Association. "This answers almost all of the questions as to the scope of insurance solicitation and activities."

"This is exactly the guidance that we have been looking for," said James D. McLaughlin, the American Bankers Association's director of regulatory and trust affairs.

Insurance regulators argued the ruling is too broad. Arkansas Insurance Commissioner Lee Douglass said First Union's agents should not be able to sell policies in urban bank branches.

"This is going to warrant a lot of further discussion," said Mr. Douglas, also chairman of the National Association of Insurance Commissioners' special committee on banks and insurance.

Wednesday's decision was the first guidance from the OCC on how and where banks may sell insurance. It follows the Supreme Court's decision in March in the Barnett Banks case, which confirmed national banks' authority to sell insurance from towns with fewer than 5,000 people.

In a 35-page document, the OCC outlined the small-town authority. Beyond meeting with customers, marketing, and selling insurance outside the town, banks may:

*Refer customers to the institution's insurance agency.

*Mail and distribute insurance advertisements and brochures.

*Market via telephone and the Internet.

*Contract with third parties for advertising support, direct marketing, telemarketing, and back-office operations.

From the small town, the OCC said, bank insurance agencies must license and manage its staff, pay commissions, process insurance applications, deliver policies, and maintain business records.

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