Bank Powers:

Issues Relating to Banks Selling Insurance

GGD-90-113: Published: Sep 25, 1990. Publicly Released: Sep 25, 1990.

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James L. Bothwell
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Pursuant to a congressional request, GAO evaluated the potential effects of banks selling insurance on consumers, other insurance sellers, and bank safety and soundness.

GAO found that: (1) banks could reduce consumers' insurance costs by lowering the costs of marketing and selling policies through joint marketing of bank and insurance products to customers; (2) since sales represented only a fraction of insurance costs, reductions in sales costs may not significantly affect premiums; (3) state regulatory oversight of insurance premiums may limit any seller's ability to affect premium rates; (4) there was limited evidence that banks coerced credit customers to buy insurance; (5) competition, banking internal controls, and regulatory oversight limited the occurrence of such abuses; (6) additional controls and oversight may hamper banking operations and diminish potential benefits for consumers; (7) expanded bank sales of insurance would increase competition among banks, other depository institutions, and lenders that sell insurance; (8) regulatory measures eliminating joint marketing of bank and insurance products would reduce banks' competitive advantage over other insurance sellers; and (9) bank sales of insurance underwritten by unaffiliated insurance companies would not endanger bank safety and soundness.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress has not acted on this recommendation. No action is likely in the forseeable future.

    Matter: If more banks gain powers to sell insurance, Congress may wish to consider the need for additional regulatory measures, including increased disclosure and separation of insurance marketing from the credit process, to protect consumers from possible coercive tie-in problems.


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