Just three months after the Supreme Court cleared the way for banks to sell insurance, a regulatory framework for the business is swiftly taking shape.
In the latest development, the Office of the Comptroller of the Currency is preparing clarifications on the scope of the court ruling, which held that national banks can sell insurance from towns with fewer than 5,000 residents.
The Comptroller's Office is poised to rule that banks with insurance operations based in small towns can market to outsiders by phone or mail, Julie Williams, the agency's chief counsel, said Tuesday.
She added that the agency is likely to permit insurance agents to meet with customers outside the small towns and sell them policies. And, she said, the regulator is considering allowing national banks to open offices of their small town insurance agencies in cities.
Banking industry officials generally were pleased by Ms. Williams' comments. But the insurance industry threatened to sue if the Comptroller's Office goes too far in giving banks additional powers.
The promised guidance comes just as the Comptroller's Office and the major trade groups finish work on best-practices policies for bank insurance sales.
The agency's guidelines, as reported in the American Banker last week, address the anti-tying rules, the applicability of state laws, and management responsibilities for insurance sales. They are expected by month's end, Ms. Williams said.
Meanwhile, all the major banking trade groups have thrown support behind best-practices guidelines drafted by the Bankers Roundtable in April. Those guidelines, apparently similar to the OCC's, suggest that all banks license their insurance brokers, institute safeguards to protect confidential information, and display signs explaining that insurance is not covered by deposit insurance.
America's Community Bankers, the Independent Bankers Association of America, and the Association of Banks in Insurance endorsed the guidelines on Tuesday. The American Bankers Association and the Community Bankers Association had announced their support in April.
Kathleen Collins, general counsel to the Financial Institutions Insurance Association, said the two best-practices policies and the OCC's interpretation of the court ruling should satisfy insurers, who have said they fear national banks won't be subject to any consumer protection laws.
"The hope here is to establish a uniform set of guidelines for the sale of insurance products for national banks and to avoid state-by-state efforts to regulate those sales," said Ms. Collins, whose group represents banks in the insurance business. "There is a high degree of interest in doing things the right way and avoiding giving states any concerns about how national banks are carrying out their responsibility."
Ms. Collins said her members are particularly supportive of the agency's effort to clarify the scope of the Barnett decision. She said Section 92 of the National Bank Act does not restrict where banks can sell insurance.
She urged the OCC to go a step further and authorize banks to establish insurance offices outside of small towns. Offices are just a small step up from door-to-door visits, she said.
"Banks, for the convenience of their customers, want to have those offices," she said.
Any action on offices will result in litigation, warned Ann Kappler, a partner at the Washington law firm of Jenner & Block, who represents the Independent Insurance Agents of America and the National Association of Professional Insurance Agents.
"They definitely don't have the authority to do that," she said. "This just makes hash with the congressional intent behind Section 92."
Richard Whiting, general counsel at the Bankers Roundtable, cautioned the industry not to expect too much. The OCC, cognizant of legal threats from the insurance agents, won't go too far, he said.
"The Comptroller will have to be careful in how it chooses the facts so it doesn't subject itself to a successful challenge of its authority," he said.
Ms. Williams said she hopes to diffuse any court challenges that the insurance industry might consider. "I'm available for whatever kind of explanatory meetings are necessary," she said.
Ms. William said the Comptroller's Office has been swamped by requests from banks for information about what the Barnett ruling means. The guidance is intended to answer many of those questions, she said.