WASHINGTON - The powerful Independent Insurance Agents of America declared Thursday they're ready to sign a truce with bankers which could free a political logjam over a bank modernization bill.
"To Congress we say: The old war between insurance and banking industries is over," said Ronald A. Smith, president of the influential insurance lobby group.
The IIAA board of directors, in a reversal of its long standing position, said it will support affiliations between banks and insurance companies, with conditions. The insurance agents want state regulation of insurance preserved as well as adoption of adequate consumer safeguards.
For years, insurance agents had adopted a hard-line stance against bank and insurance affiliations, fearing that banks would quickly dominate the industry, putting some agents out of business.
Generally, banks are most heavily involved in selling annuities - a popular retirement investment product that was created by the insurance industry. The reform bill would greatly enhance their ability to distribute annuities and other insurance products by acquiring insurers.
The financial stakes of the battle are enormous: UBS Securities LLC estimated last year that life insurance premiums earned by banks would rise from $400 million to as much as $4 billion by the turn of the century.
This intense battle over banks' insurance powers has served as a major roadblock to financial services reform legislation in Congress which would, among other things, repeal the 1933 Glass Steagall Act that separates banks from securities firms.
The insurance agents' opposition was undermined last year by a major Supreme Court decision that effectively allowed banks to sell insurance nationwide through small town branches. And the Comptroller of the Currency issued a series of decisions to expand banks' insurance powers.
And last fall, independent insurance agents lost important political support when the American Council of Life Insurance, which represents large life insurance companies, announced it would begin to negotiate bank-insurance affiliations.
"Politically I think the agents recognize the fact that a great majority of the financial industry now is united against their former position and that they will have to come around," said Edward Yingling, government relations director for the American Bankers Association.
"We congratulate them on changing their position and look forward to working with them," he added. This means that all major players in the financial services industry - securities firms, banks, savings and loans and insurers - now share a basic agreement over the outline of a reform bill, Yingling said.
House Banking Chairman James Leach, R-Iowa, who again is sponsoring a bank reform bill this year, called the insurance agents' new position "a positive signal indicating that prospects of constructive reform are credible in this Congress."