OCC Preempts Parts Of Massachusetts Bank Insurance Law

By

Washington

The Office of the Comptroller of the Currency has again determined that a state law regulating bank insurance activities violates the Gramm-Leach-Bliley Act and should be preempted.

This time the target is a Massachusetts law, and the OCC says three provisions in the law wrongly “prevent or significantly interfere” with the ability of banks to sell, solicit or cross-market insurance.

David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, says NAIFA is examining the decision.

It is “disappointing,” he says, that the OCC has yet again interfered with a state law NAIFA and other agent groups believe contains important consumer protections.

The first provision challenged by the OCC prohibits non-licensed personnel from referring a prospective customer to a licensed agent or broker unless the customer initiates the inquiry.

The second provision bars banks from compensating employees who make such a referral.

The third provision prohibits banks from telling loan applicants that insurance products are available from the bank until after the application is approved.

OCC says its action would not preempt any provision of the model Unfair Trade Practices Act developed by the National Association of Insurance Commissioners.

Earlier, the OCC said four provisions of a bank insurance law in West Virginia should be preempted on the same basis as for Massachusetts.

Two property-casualty agent groups, the Independent Insurance Agents of America and the National Association of Professional Insurance Agents, filed a lawsuit against the OCC seeking to overturn its determination.

The lawsuit is now pending in the U.S. District Court for the District of Columbia.

NAIFA is not a party to that lawsuit.

Robert A. Rusbuldt, CEO with IIAA, says his group may again consider litigation.

In other news, the House Committee on Education and the Workforce last week approved legislation aimed at enhancing workers pension rights in the wake of the Enron scandal.

The legislation, H.R. 3762, imposes new requirements on plan sponsors to protect assets in 401(k) plans.

At the same time, H.R. 3762 incorporates legislation strongly supported by insurance companies and agents that makes it easier for them to provide investment advice to plan participants.

Under H.R. 3762, corporate executives would be barred from selling company stock during blackout periods, and they will also be required to give participants 30-days notice of a blackout period.

Blackout periods are intervals when participants are barred from changing their investments. They usually occur when a plan changes recordkeepers.

H.R. 3762 also imposes fiduciary duties on plan sponsors during blackout periods. The legislation also requires companies to give workers quarterly statements about their accounts and notify workers of their rights to diversify.

The investment advice language closely tracks that of the Retirement Security Advice Act, H.R. 2269, which the House previously passed.

This provision allows companies, agents and others that provide services to a 401(k) plan to also provide investment advice to plan participants, subject to strict disclosure requirements.

Kathryn Ricard, vice president for retirement and pensions with ACLI, says current rules bar the parties best equipped to advise employees, including insurers, from doing so.

Finally, Oklahoma Governor Frank Keating, a Republican, is the latest rumored frontrunner to become the next president of the American Council of Life Insurers.

Keating’s name has been mentioned frequently in recent days as a possible candidate for the ACLI position, but National Underwriter was unable to confirm the rumors.

However, the National Journal, a respected Capitol Hill magazine, published an item last week saying that the “buzz” around town is that Keating is the frontrunner.

ACLI continues to decline any comment on its search.

A call to Keatings office was not returned.

According to Keatings official biography, the 58-year-old governor is a former special agent for the FBI. He was elected governor of Oklahoma in November 1994 and was reelected in 1998.

His biography does not list any specific experience in the life insurance business. However, he does cite reform of Oklahomas workers compensation system as one of his major accomplishments.

Earlier, ACLI reportedly discussed the presidency with Rep. Earl Pomeroy, D-N.D., but Pomeroys office says he is no longer a candidate.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 25, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.