Magazine article American Banker

Lobbyists Want to See a Stop Put to Citibank's Growing Insurance Sales: Claim New York Bank Sidestepped Law to Lease In-Branch Center Space

Magazine article American Banker

Lobbyists Want to See a Stop Put to Citibank's Growing Insurance Sales: Claim New York Bank Sidestepped Law to Lease In-Branch Center Space

Article excerpt

NEW YORK -- A coalition of insurance lobbyists has announced it will seek legal action to block Citibank's new in-branch insurance centers.

The coalition, known as "Brace," for Bank Regulation: Agents Committee Effort, claims New York-based banking giant Citibank deliberately circumvented the law when it leased branch space to American International Life Assurance Co. (AILife) for the sale of life insurance.

Citibank and AILife, which is a subsidiary of American International Group Inc., or AIG, opened the first two of eight in-branch retail centers last month. They plan to open more centers and offer home owners, renters, and automobile insurance in the next 12 months.

A statement issued by Robert Heslip, chairman of the coalition, said, "Citibank and AIG are callously telling the [New York State] Legislature, which is currently considering proposals to allow banks to get into the insurance business, that if they [legislators] don't allow banks to sell insurance directly, the banks will present them with a fait accompli."

The coalition consists of the New York State Association of Life Underwriters, the Independent Insurance Agents Association of New York, and the Professonal Insurance Agents of New York, and is supported by other insurance and professional groups, Mr. Heslip said.

A spokesman for Citibank said the firm had "no comment at this time."

Mr. Heslip said the Citibank/AIG plan is potentially harmful to the consumer, since bank insurance sales in credit-related transactions show that "abuses in this area are well-documented."

The chairman said that recent events, notably the federal bailout of Continental Illinois Corp. and the failure of a 56 banks this year, demonstrate the need for caution in granting banks permission to venture into the riskier, nontraditional areas such as insurance. …

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