State banks gearing up to sell insurance

Public Record, The, Feb 10, 1997 by Holliday, Karen Kahler

With the allure of increased insurance capabilities on the horizon, many Mississippi banks are quietly gearing up for what they hope could be a bonanza of new business-development opportunities.

While Congress continues to wrangle with the umbrella issue of expanded bank powers and financial-service provider boundaries, many Mississippi bankers say the industry is finding greater relief these days from the courts and national regulators.

Significantly shaping the dialogue is a 1996 U.S. Supreme Court decision regarding Florida-based Barnett Bank. In it, the high court ruled that a federal statute that allows national banks located in towns with populations of 5,000 or less to sell insurance pre-empts contrary state law, and that such banks may sell insurance as authorized by the Comptroller of the Currency.

Nonetheless, Mississippi interpretations remain cloudy.

Many bankers will be watching the outcome of a 1996 lawsuit filed by Jackson-based Deposit Guaranty National Bank in the U.S. District Court for the Southern District of Mississippi against Mississippi Insurance Commissioner George Dale. The suit--which is still awaiting a date for oral arguments--asserts that the bank is entitled to sell insurance products in accordance with the U.S. Supreme Court decision handed down last year.

Deposit Guaranty officials said the laws of various states run the gamut in preventing or restricting bank insurance sales, and the U.S. Supreme Court decision established a federal framework to promote uniformity and "help level the playing field" between bank and nonbank financial services providers.

Mississippi Insurance Commissioner George Dale said he could not comment on the Deposit Guaranty case. However, he said that in a changing financial services environment, his concern was the "proper regulation and supervision of companies and employees who sell insurance products."

Despite differing nuances of interpretation, as well as questions regarding parity for state-chartered banks in Mississippi and oversight responsibilities for bank-related insurance sales, some Mississippi bank executives said they are optimistic that they will attain the insurance powers they seek. While most are mum on specific strategies, many indicated they were getting their houses in order for the prospect of unencumbered insurance capabilities.

"We're looking at it carefully," said William H. Andrews, senior vice president with Memphis-based Union Planters, which has considerable Mississippi banking operations, as well as some insurance related activities in Tennessee.

"We feel it's important to expand into that area, and we're developing our plans and studying our options," said Aubrey Burns Patterson, CEO of Tupelo-based BancorpSouth. Although Patterson declined to comment further, observers said it is likely the company's western Tennessee market will be priority one, as many of its Tennessee bank competitors are delving deeper into insurance-product marketing.

Deposit Guaranty President Howard McMillan said his company has hired a national consultant to assist the bank in the development of its insurance-related strategies. Like BancorpSouth, it too may enjoy some increased flexibility beyond Mississippi, given its Louisiana and Arkansas operations.

A recent study by the American Bankers Association Securities Association may reinforce bankers' optimism for insurance-product potential--namely annuities. The study, conducted by St. Petersburg, Fla.,-based American Brokerage Consultants and commissioned by ABASA, said that of the more than 3,000 banks that currently offer retail investment products, 85% sell annuities, up from 66% in 1994. Of the banks that responded, 80% said overall sales of retail investment products--including annuities, mutual funds, fixed-income products, discount and full-service brokerage services increased from the previous year.