Banking and Insurance: Before and after the Gramm-Leach-Bliley Act

By Broome, Lissa L.; Markham, Jerry W. | Journal of Corporation Law, Summer 2000 | Go to article overview
Save to active project

Banking and Insurance: Before and after the Gramm-Leach-Bliley Act

Broome, Lissa L., Markham, Jerry W., Journal of Corporation Law


The Gramm-Leach-Bliley Act of 1999 (GLB)1 is landmark financial services legislation. GLB is the culmination of over thirty years of effort to reform the regulation of financial services.2 During this period, Congress considered numerous bills without reaching consensus.3 GLB was enacted on November 12, 1999, and many of its most significant provisions became effective on March 1, 2000.4 For many observers, GLB is notable for its repeal of the Glass-Steagall Acts restrictions on commercial bank affiliates' investment banking activities. Of equal interest, however, are provisions that widen the entrance for banks into the insurance industry. Both sets of changes are expected to encourage further the consolidation of financial services and provide additional competition in the offer, sale, and underwriting of insurance products and securities.

At the same time, GLB subjects insurance affiliates of banks to "functional" regulation by state insurance and securities regulators. Largely for historical reasons that have little relevance in today's economy, regulation of traditional insurance products has been relegated to the states.6 Nontraditional insurance products, such as so-called variable insurance products that have a market return feature, are also subject to regulation by securities regulators. Predictably, this welter of regulations and regulators will continue to impede bank insurance activities even as GLB opens the door for their expansion.

This Article traces the growth of insurance in America and describes how its regulatory structure developed separately from the regulatory structure of other financial services. The authors show how banks became involved in insurance activities as a way to expand their traditional banking services. Regulatory restrictions at first impeded that effort, but GLB has now opened the door to allow greater expansion. Nevertheless, as the Article describes, banks continue to face regulatory hurdles and restrictions under GLB that will impair their ability to compete in the insurance business. Finally, the authors question whether the "functional" regulation on which GLB is premised is an efficient and effective method to regulate financial products.


Insurance is an important part of our modern financial structure, and banks play an increasingly important role in that industry. To understand the regulatory tension created when banks provide and market insurance products, it is important to appreciate the background and historical antecedents of the insurance industry. For reasons that will be explained in this part, insurance is regulated at the state level. Banking regulation is a curious mix of state and federal regulation.7 The regulatory complications created when banking and insurance are offered by the same entity or in affiliated entities are selfevident and are discussed further later in this Article.8

A. Early History

Like other aspects of our financial system, insurance had its beginnings in ancient societies. The annuity concept dates back to ancient Egyptian, Hindu, and Chinese societies.9 Life insurance appeared in Europe between the twelfth and sixteenth centuries.lI One such policy was issued in March of 1411, insuring the life of a pregnant slave belonging to Barnaba Boneto in Genoa.II Fire insurance appeared in Flanders in the early thirteenth century.12 A legal action on a contract of marine insurance was filed in the City of Bruges in 1377.13

The concept of insurance was introduced in England by the Lombards in the thirteenth century.14 Queen Elizabeth granted rights to register assurances at the Royal Exchange in 1574.15 Lloyd's of London began at Edward Lloyd's Coffee House in 1688, where merchants gathered to discuss shipping and its attending risks.16 Life insurance policies were offered in England as early as 1583.17 Life insurance was initially viewed as gambling and was prohibited in several European countries during the sixteenth and seventeenth centuries.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Banking and Insurance: Before and after the Gramm-Leach-Bliley Act


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?