AGENT GROUPS SUE OCC OVER WV PREEMPTION DETERMINATION
Associations Seek Declaratory Judgment Voiding OCC Actions

WASHINGTON, DC, November 13—Two groups representing nearly 500,000 of the nation’s insurance agents have filed a lawsuit in federal court asking that a U.S. Office of the Comptroller of the Currency (OCC) opinion that parts of a West Virginia insurance law are preempted be declared null and void.

The Independent Insurance Agents of America (IIAA) and the National Association of Professional Insurance Agents (PIA) filed their legal challenge today in the U.S. District Court of the District of Columbia.

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“We firmly believe the OCC preemption determination violates not only the letter, but the spirit of the Gramm-Leach-Bliley Act (GLBA), which leaves oversight of insurance activities squarely in the hands of state regulators,” says IIAA CEO Robert A. Rusbuldt. “We feel that the OCC opinion is an affront to state regulation and states’ rights because it holds that legitimate state insurance laws should not apply to financial institutions.

“If left unchallenged, the OCC’s actions could lead to the creation of a dual regulatory system for insurance: a federal one for banks with less oversight and a state-based system for insurance agents,” continues Rusbuldt.

Through the petition filed in the federal court, the two groups are seeking relief because the OCC exceeded its statutory authority by attempting to preempt several consumer protections in the West Virginia Insurance Sales Consumer Protection Act so the provisions would not apply to banks.

“The primary justification for the preemption determination was the OCC’s assertion that compliance would impose cost on bank sales of insurance products,” says PIA Executive Vice President Gary Eberhart. “If left unchecked, this OCC preemption order could be applied to any insurance regulation that applies to banks. To permit the OCC to decide whether such provisions will apply to banks is an overreach of the federal agency’s regulatory authority.

“The OCC treats banks as something other than an insurance entity when the bank is engaging in insurance practices,” asserts Eberhart. “Any idea that Congress intended to give a federal agency power over the legislative decisions of a state governing body is absurd.”

The OCC action, published in the Oct. 9 Federal Register, is “arbitrary, capricious, an abuse of discretion and otherwise not in accordance with the law, and accordingly is null and void,” charges the agent groups’ lawsuit. Key consumer protections singled out by the OCC include:

+ Provisions requiring financial institutions to protect consumers by using different employees for insurance and deposit operations;

+ Protections for consumers against credit coercion by stipulating that insurance cannot be offered until after a loan commitment is tendered;

+ Conditions requiring separate facilities for loan/deposit and insurance operations; and

+ Parts of the state law covering the manner and timing of consumer disclosures.

America’s insurance agents will not allow this action by the OCC to go unchallenged. To do so would effectively permit the regulation of insurance sales to an entity that seeks to expand its jurisdiction over insurance for the benefit of banks and to the detriment of insurance agencies, says the IIAA and PIA leaders.

At least 19 states have adopted consumer protection measures similar to the West Virginia statute and would be endangered if the OCC opinion were allowed to be implemented. Both agent groups believe these state statutes should be equally applied whether the entity engaged in insurance sales is a bank, an insurance carrier or an insurance agency.

“We have known for a long time that the Comptroller of the Currency sees insurance as nothing more than another bank product, but that is not the case under federal and state law,” says Rusbuldt and Eberhart. “The OCC’s agenda is to free banks from state regulation, including state-based consumer protection measures. Our members will not stand for it.”

Founded in 1896, IIAA is the nation’s oldest and largest national association of independent insurance agents, representing a network of more than 300,000 agents and agency employees nationwide. Its members are small businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents offer all lines of insurance—property, casualty, life, health, employee benefit plans and retirement products. Web address: www.independentagent.com .

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses.