WASHINGTON, D.C. -- A spokesman for the American Association of Retired People (AARP) said here at the annual federal legislative conference of the National Association of Professional Insurance Agents, that the courts and Congress must preserve the right of states to regulate the conditions under which banks may sell insurance and related financial services in their jurisdictions.
Ken Brunette, senior legislative representative for AARP, told the conference that insurers and consumers alike should be wary of any federal mandate allowing bank insurance sales. He said Section 92 of the National Bank Act, the so-called small town loophole, permits banks to sell insurance in towns of less than 5,000 residents, but has been mired in PIA-driven litigation.
"The intent of Section 92," Brunette said, "is not to pre-empt state laws." He said, to the contrary, allowing giant banks to sell insurance, mutual funds and related financial services nationwide without restriction would drain money out of local communities at the expense of local businesses."
The financial services marketplace is already saturated with competing providers, noted Brunette. "The Comptroller of the Currency's voluntary guidelines for the disclosure of terms and conditions on bank products do little to mandate compliance," he warned, noting that at least 82 percent of consumers are unaware that bank annuities and mutual funds do not fall under the protection of the FDIC.
Such statistics illustrate the unique consumer protection and fairness difficulties generally created when banks are granted insurance powers, according to PIA President Charlie Crowley. "It is endemic and broad-based, and should concern all lawmakers," he said.
Brunette added that AARP will work to achieve full disclosure and to lensure that states which allow banks insurance sales adopt reforms to place Ibanks on a level playing field with other insurance providers.
Natural Disaster Act
The Natural Disaster Protection Act (H.R. 2873) is expected to move forward in this Congress and will include changes demanded by PIA, the agents were told at the conference.
More than 400 agents at the conference were briefed on the need and status of catastrophic insurance by Frank Nutter, president of the Reinsurance Association of America.
Nutter observed that the industry natural disaster coalition pushing the legislation has agreed to PIA's demands to improve the legislation so that insurance policyholders understand...