Hoping to head off regulation, three industry trade groups last week proposed a series of "best practices" policies for bank insurance sales.
"We saw there was a need for some standards for banks offering insurance," said Richard Whiting, general counsel to the Bankers Roundtable. "The banking industry needed to take the initiative to show we were responsible corporate citizens."
The policies address licensing, training, tying, and other issues that consumer groups and insurance industry officials have raised as banks have begun moving into the business. They were endorsed by the Roundtable, the American Bankers Association, and the Consumer Bankers Association.
The need for best practices policies took on added urgency in recent months. The U.S. Supreme Court ruled last month that states cannot prevent national banks from selling insurance. This so-called Barnett decision is expected to spark an increase in bank insurance sales.
The Barnett case also led the Office of the Comptroller of the Currency to begin work on its own best practices policy statement. This guideline is expected to be released this summer and should address the same issues.
The industry's proposal specifies that all employees who sell insurance should be licensed as required under applicable state or federal laws.
It recommends training any employee who sells products or refers customers to insurance brokers. Training should cover customer protection rules, conflicts of interest, and compliance issues, it says.
The proposal also tackles anti-tying rules. It says a banker must disclose both orally and in writing at the time of sale that the institution cannot require the consumer to buy insurance from it in order to get a loan or open an account.
Banks also are recommended to display signs stating that insurance benefits are not insured by the Federal Deposit Insurance Corp. nor guaranteed by the institution.
The best practices policies also recommend that banks establish a guideline for handling confidential information obtained from customers and that they periodically review which insurance products they sell.
Mr. Whiting said the trade groups do not expect the guidelines to increase the cost of doing business significantly.