IIABA: GLBA Does Not Preempt W. Va. Insurance Laws

October 31, 2002

The Independent Insurance Agents & Brokers of America (IIABA) and the state of West Virginia argued before a federal appeals court against a U.S. Office of the Comptroller of the Currency (OCC) opinion letter stating that the Gramm-Leach-Bliley Act (GLBA) preempts essential components of West Virginia’s insurance laws.

The U.S. Fourth Circuit Court of Appeals, based in Richmond, Va., granted IIABA’s motion to intervene in the case of the State of West Virginia vs. OCC. IIABA retained counsel Scott Sinder, who argued that GLBA places just one limitation, irrelevant to this case, on insurance regulators. Sinder also posited that West Virginia’s Insurance Sales Consumer Protection Act does not undermine the ability of banks to sell, solicit or cross-market insurance products.

“With respect to insurance, one of the purposes and objectives of Congress in passing the Gramm-Leach-Bliley Act was to allow bank holding companies and subsidiaries of banks to engage in insurance agency activities provided that they comply with state insurance laws,” Sinder explained to the three-judge appeals court panel. “The only limitation on a state’s right to regulate insurance activities is that no state may ‘prevent or significantly interfere with’ the ability to engage in insurance sales, solicitation or cross-marketing activities. Regardless of the scope of that standard, the West Virginia consumer protection provisions—which primarily require consumer notices and protection from credit tie-ins—clearly do not violate that test.”

IIABA believes that the OCC’s West Virginia preemption determination violates not only the letter but also the spirit of the GLBA, which endorses functional regulation and leaves oversight of insurance activities squarely in the hands of insurance regulators.

“We are not fighting wars of the past, but we need to recognize that insurance laws and the authority of insurance regulators need to be upheld, or it could put the insurance industry at a competitive disadvantage when other regulators determine they don’t like a law,” said IIABA CEO Robert A. Rusbuldt. “This issue is not about banks selling insurance. The United States Supreme Court has determined that banks can sell insurance, and the GLBA determined that banks can even own insurance companies. Banks can sell insurance in the state of West Virginia; no one is trying to turn back the clock on the Supreme Court decision. This issue is about the parameters of the regulators and whether functional regulation is fact or fiction.”

Sinder noted that the West Virginia Bankers Association (WVBA) initially consented to the state law, and Sinder cited dozens of banks successfully selling under the contested law, including the largest agency in West Virginia, which is a bank subsidiary.

“The OCC is ignoring the fact that functional insurance regulation already is in place in this country and it has been codified by the Gramm-Leach-Bliley Act,” said Sinder. “The far-reaching effects of the OCC’s predisposed opinion will impact thousands, and possibly millions of consumers.”

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