Functional Regulation of Bank Sales of Insurance—A Complicated Matrix is Developing with Potential Pitfalls

Federal courts and regulators continue to determine the scope of national bank insurance and annuity sales powers under Sec. 92 and Sec. 24 of the National Bank Act. The efforts of state insurance departments to restrict national banks' involvement in insurance and annuity sales activities have failed to survive federal court challenges in several states. Using the US Supreme Court's decisions in Barnett Bank of Marion County NA v. Nelson (1996) and NationsBank of North Carolina NA v. Variable Life Insurance Co. (1995), the Office of the Comptroller of the Currency has gained more yardage for national banks in its quest for greater insurance powers. Federal courts have preempted state insurance statutes, regulations and interpretive positions attempting to block OCC gains, allowing banks to score in the lucrative insurance market. It is suggested that only Congress can level the playing field to prevent a lopsided outcome in this battle between insurance and bank regulators.