# VT Insurance Bulletin #117: Guidelines for Insurance Sales by Banks

> Vermont · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/VT_INS_B_117_20010702

## Section

- **Citation:** VT Insurance Bulletin #117
- **Heading:** Guidelines for Insurance Sales by Banks
- **Jurisdiction:** Vermont
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Vermont DFR Insurance Bulletins / Guidelines for Insurance Sales by Banks

## Text

Department of Banking, Insurance, Securities & Health Care Administration

REVISED JULY 2, 2001
PLEASE NOTE: Only section 3.C on proper disclosures of banks sales of insurance
is being revised at this time to reflect the provisions of the new federal rules on
consumer disclosures in bank sales of insurance. There will be further revisions to
Bulletin 117 later this year to reflect other changes under the federal Gramm-
Leach-Bliley Financial Modernization Act of 1999.

Vermont Insurance Division Bulletin 117
Guidelines for Insurance Sales by Banks
Section 92 of the National Bank Act permits national banks located and doing business in
any place with a population of not more than 5,000 inhabitants to act as the agent for any
fire, life or other insurance company authorized by the authorities of the State to do
business there. In Barnett Bank v. Nelson, 116 S.Ct. 1103 (1996), the United States
Supreme Court unanimously determined that, despite state laws forbidding banks or their
affiliates from engaging in insurance sales, national banks could act as agents in the sale
of insurance under the authority of Section 92.
As a result, § 4811 of Title 8, Vermont Statutes Annotated, which limits the ability of
banks to sell insurance, is preempted by Section 92 for any national bank with a main
office or branch and a bona fide agency in a place with not more than 5,000 inhabitants.
(See letter of Julie Williams, Chief Counsel, Comptroller of the Currency, to First Union
Corporation, November 4, 1996.) Vermont banking law contains the so called "wild
card," "parity plus" or "expanded powers" section, 8 V.S.A. § 606(a). This law was
enacted to place Vermont state-chartered banks on an equal footing with national banks
by providing state-chartered banks with the powers conferred on national banks by
federal law. Section 606 permits any Vermont state-chartered bank to act as an agent in
the sale of insurance to the same extent national banks are so permitted
lus" or "expanded powers" section, 8 V.S.A. § 606(a). This law was
enacted to place Vermont state-chartered banks on an equal footing with national banks
by providing state-chartered banks with the powers conferred on national banks by
federal law. Section 606 permits any Vermont state-chartered bank to act as an agent in
the sale of insurance to the same extent national banks are so permitted.
The Commissioner's position is that all banks acting as agents in the sale of insurance in
Vermont must comply with all applicable insurance laws, including those on licensure.
Other applicable insurance laws include the requirement to act only on behalf of
Vermont-authorized insurance companies (8 V.S.A. §§ 3301, 3361) offering Vermont-

approved insurance products (8 V.S.A. § 3541), the prohibition against rebating (8
V.S.A. § 4724(8)), and the prohibition against coercion of debtors (8 V.S.A. § 4725)
(also addressed in federal banking law as the prohibition against "tying"). Banks acting as
insurance agents are also expected to take all reasonable steps to avoid consumer
confusion. This document sets forth the Commissioner's position about the applicability
of insurance laws on bank and bank-affiliated insurance activities permitted as a result of
the Barnett decision, and what banks are expected to do to avoid consumer confusion.
These Guidelines apply only to the authority to sell insurance resulting from the Barnett
decision, and therefore do not apply to the sale of credit insurance by banks under 8
V.S.A. § 4811. The ability of banks to sell annuities originates in other federal authority,
and so continues to be subject to Banking Bulletin No 18. Therefore, these Guidelines do
not address annuities sales by banks
These Guidelines apply only to the authority to sell insurance resulting from the Barnett
decision, and therefore do not apply to the sale of credit insurance by banks under 8
V.S.A. § 4811. The ability of banks to sell annuities originates in other federal authority,
and so continues to be subject to Banking Bulletin No 18. Therefore, these Guidelines do
not address annuities sales by banks.
Banks that are eligible to engage in the sale of insurance as described above that either
have their main office or a full service branch (an automated teller machine is not
considered a full service branch under these guidelines) in a "place" with a population of
not more than 5,000 inhabitants may engage in the business of insurance as an agent or
through a bona fide insurance agency located in that "place." To date, the Comptroller
has not issued an opinion interpreting the word "place" as used in the relevant section of
the National Bank Act. If such an opinion is issued by the Comptroller, the
Commissioner will reconsider these guidelines as they pertain to the meaning of the word
"place" at that time. Until such reconsideration, the Commissioner will view "the
particular county and city, town or village" where a bank's full service banking
operations are carried on, (see for example 12 U.S.C. § 22 Second), as the "place" which
must have a population of not more than 5,000 inhabitants. The Commissioner will
determine the population of a "place" by using the most recent U.S. decennial census. An
agency located in a place of not more than 5,000 that conducts its business in the manner
described by Julie Williams, Chief Counsel, Comptroller of the Currency, to First Union
Corporation, November 4, 1996, will be considered a bona fide insurance agency under
these Guidelines. According to Ms. Williams' opinion:
The agency located in the "place of 5,000" must. . . be bona fide
l census. An
agency located in a place of not more than 5,000 that conducts its business in the manner
described by Julie Williams, Chief Counsel, Comptroller of the Currency, to First Union
Corporation, November 4, 1996, will be considered a bona fide insurance agency under
these Guidelines. According to Ms. Williams' opinion:
The agency located in the "place of 5,000" must. . . be bona fide. [An agency will be
considered bona fide if its] agents will be managed through the agency and the "place of
5,000" will be the agency's business location for licensing purposes. [The] agency will be
responsible for collecting commissions from insurance carriers and paying commissions
to its licensed sales staff. The agency [will be generally] responsible for processing
insurance applications, delivery of insurance policies, and collection of premiums, where
consistent with procedures of the relevant insurance carriers. In addition, business records
of the agency, including copies of customer application and policy information, and
licensing, customer complaint, and other compliance records, will be available at the
"place of 5,000." Business records may be maintained and available at the agency in
electronic form, with the original hardcopy kept in off-site storage.
The bank agency and its agents may seek the same market range and use the same
marketing tools and facilities as generally available for a licensed insurance agency, not
tomer complaint, and other compliance records, will be available at the
"place of 5,000." Business records may be maintained and available at the agency in
electronic form, with the original hardcopy kept in off-site storage.
The bank agency and its agents may seek the same market range and use the same
marketing tools and facilities as generally available for a licensed insurance agency, not

affiliated with a bank, that is based in the "place of 5,000." (footnote omitted) This will
generally allow the following:
o Meetings with customers and solicitations and sales of insurance by agents
of the bank agency may take place at locations inside the "place of 5,000"
as well as at locations outside that "place," provided the agents are
managed and paid through the bank agency located in the "place of 5,000"
and use that location as their place of business for licensing purposes. If an
insurance company has adopted other procedures for its nonbank agents,
however, the bank agency may follow the same procedures as other
insurance agents selling the company's policies.
o Mailings to advertise and sell insurance may originate from inside or
outside of "the place of 5,000," and brochures, leaflets and other literature
alerting potential customers to the bank's insurance activities may be
distributed from locations both inside and outside of the "place of 5,000,"
including other branches of the same bank. Personnel of bank branches
outside of the "place of 5,000" also may make referrals to the bank's
insurance agency. Likewise, telephone and cybermarketing may be used
and the calls and messages need not originate within the "place of 5,000."
o The bank may contract with third parties to assist the agency's sales
activities. For example, third parties might provide advertising support,
direct mail marketing services, telemarketing services, payments
processing, or other types of "back office" support.
Williams' letter, pages 33 and 34 and footnote 160.
1. Licensing
alls and messages need not originate within the "place of 5,000."
o The bank may contract with third parties to assist the agency's sales
activities. For example, third parties might provide advertising support,
direct mail marketing services, telemarketing services, payments
processing, or other types of "back office" support.
Williams' letter, pages 33 and 34 and footnote 160.
1. Licensing.
Any individual or entity soliciting applications for insurance or negotiating policies of
insurance in Vermont must be licensed as an insurance agent (including required nonresident licenses, where appropriate). Bank employees or other individual bank
representatives soliciting or negotiating policies of insurance must be licensed as
insurance agents. Insurance agent licensing is governed largely by 8 V.S.A. chapter 131.
Vermont law defines an insurance agent as an individual appointed by an insurer who
solicits or negotiates a policy of insurance for an insurer. A separate appointment is
required from each insurance company an individual insurance agent represents. Vermont
law also requires any person, partnership, association or corporation to be licensed as an
insurance agent if it acts as or holds itself out to be an insurance agent.
Individuals within an insurance agency engaged in purely clerical tasks are not required
to be licensed. A clerical task, a task associated with record keeping or file management,
does not require the insurance expertise of an agent. Similarly, a bank employee
performing only clerical tasks related to the bank's insurance agency function would not
be required to be licensed. However, only properly licensed individuals, possessing the
aged in purely clerical tasks are not required
to be licensed. A clerical task, a task associated with record keeping or file management,
does not require the insurance expertise of an agent. Similarly, a bank employee
performing only clerical tasks related to the bank's insurance agency function would not
be required to be licensed. However, only properly licensed individuals, possessing the

expertise and knowledge of an insurance agent, should be giving advice about insurance
or selling insurance.
A bank, like any other entity, must be licensed if it contracts with an insurance sales
entity and shares in commissions paid by insurance companies for the sale of insurance
products. Licensure is required if a bank enters into such a third-party relationship and is
compensated based on the volume of insurance applications or insurance sales. Receiving
upstreamed dividends from an insurance sales subsidiary of a bank by the parent bank
will not be considered commission sharing, and will not, without more, require the bank
to be licensed as an insurance agent.
Licensure will be required of banks, insurance agencies, or any other non-insurer entities
which employ or otherwise contract with individual insurance agents. The Department
currently anticipates that this requirement will become effective for all agencies as of
April 1, 1998. Entity licensees will not be required to obtain appointments from insurers,
provided all insurance is placed with insurers by licensed individuals with appropriate
appointments. This requirement will be in addition to the requirement to license
individuals acting as agents. The Insurance Division will publish a bulletin further
describing this requirement.
Questions about how to apply for an insurance agent's license should be directed to the
Agent Licensing Supervisor, at (802) 828-3303.
2. Use of authorized companies and authorized products
propriate
appointments. This requirement will be in addition to the requirement to license
individuals acting as agents. The Insurance Division will publish a bulletin further
describing this requirement.
Questions about how to apply for an insurance agent's license should be directed to the
Agent Licensing Supervisor, at (802) 828-3303.
2. Use of authorized companies and authorized products.
Vermont law requires an insurance company to be licensed or otherwise authorized by
the Commissioner to do insurance business before it can sell insurance in Vermont. The
companies that are currently licensed or authorized are listed in the Annual Report of the
Insurance Commissioner. The report can be obtained from the company licensing section
of the Insurance Division at (802) 828-2470.
All insurance products must be reviewed and approved by the Insurance Division before
they can be sold or issued for delivery in Vermont. Any insurance company wishing to
sell or issue insurance policies in Vermont should be able to show that it has obtained all
appropriate approvals from the Insurance Division. Banks may only sell insurance
products that have been approved for sale by the Commissioner and that are offered by
licensed insurance companies.
3. Sales practices.
The sale of insurance is subject to the provisions contained in 8 V.S.A., chapters 129 and
131, among others. Banks should develop and implement policies and procedures to
ensure that insurance product sales activities are conducted in compliance with Vermont
insurance statutes and regulations, just as they do to ensure that banking activities are
conducted in compliance with federal and state banking statutes and regulations. The
Commissioner urges particular attention to the requirements of 8 V.S.A., chapter 129,
velop and implement policies and procedures to
ensure that insurance product sales activities are conducted in compliance with Vermont
insurance statutes and regulations, just as they do to ensure that banking activities are
conducted in compliance with federal and state banking statutes and regulations. The
Commissioner urges particular attention to the requirements of 8 V.S.A., chapter 129,

Insurance Trade Practices; and Regulation 79-2, Fair Claims Practices. A bank is
responsible to provide its agents and employees with proper instruction and supervision.
The Commissioner recommends the development and use of appropriate procedures for
review of a bank's insurance sales program. Bank personnel involved in selling insurance
products must adhere to fair and reasonable sales practices. The Commissioner
recommends that banks adopt effective management and internal audit compliance
reviews concerning such practices. Any compliance procedures should also provide for a
system to monitor customer complaints and their resolution. To discharge the bank's
supervisory responsibilities, the Commissioner recommends that a bank's compliance
procedures should also call for verification that third-party sales are being conducted in a
manner consistent with the governing agreement with the bank, where applicable.
(A) Tying and packaging. Banks are prohibited from requiring the purchase of insurance
from the bank itself or any affiliated insurance agency, as a condition for the bank to
establish a deposit account, to extend credit, lease or sell property of any kind, fix or vary
the consideration for any such extension of credit, lease, sale or service, or for any other
service offered by the bank or its affiliates.
A bank may offer to sell an insurance product in combination with a banking product or a
combination of banking products only if there is no reduction in cost to the customer for
the products as a result of the addition of the insurance
kind, fix or vary
the consideration for any such extension of credit, lease, sale or service, or for any other
service offered by the bank or its affiliates.
A bank may offer to sell an insurance product in combination with a banking product or a
combination of banking products only if there is no reduction in cost to the customer for
the products as a result of the addition of the insurance. Although a bank may bundle
certain traditional bank products and present a package to a customer at a reduced rate,
the addition of an insurance product to the bank package may not have a cost which is
any different than the cost would be for the bank package and the insurance product
separately. No person shall require or imply that the purchase of an insurance product
from a bank by a customer or prospective customer of the bank is required as a condition
of, or is in any way related to, the lending of money or extension of credit, the
establishment or maintenance of a trust account, the establishment or maintenance of a
deposit account, or the provision of services related to any such activities, or for any
other service offered by the bank or its affiliates.
If insurance is required as a condition of obtaining a loan, the credit and insurance
transactions shall be completed independently and through separate documents. A loan
for premiums on required insurance shall not be included in the primary credit without
the written consent of the customer.
(B) Anti-rebating. Vermont law prohibits the use of rebates by an insurance agent. A
rebate is anything of value given, directly or indirectly, by an insurance agent as
inducement to purchase an insurance policy. For example, a rebate occurs when an agent
attempts to make a sale by agreeing to lower its commission on the sale in order to lower
the purchase price of the insurance. An agent must charge the purchaser the price which
has been filed with the Department by the insurance company the agent is representing.
(C) Proper disclosures
n insurance agent as
inducement to purchase an insurance policy. For example, a rebate occurs when an agent
attempts to make a sale by agreeing to lower its commission on the sale in order to lower
the purchase price of the insurance. An agent must charge the purchaser the price which
has been filed with the Department by the insurance company the agent is representing.
(C) Proper disclosures. Any solicitation or sale of an insurance product by a bank
shall occur in a manner that assures that the insurance is clearly differentiated from
deposit products insured by the Federal Deposit Insurance Corporation (FDIC) and

from products which are obligations of the bank. To accomplish this, the bank shall
provide written disclosure in 10 point type or larger before the sale of an insurance
product and written or oral disclosure with solicitations of insurance products.
Appropriate disclosure is also required when a bank affiliate, subsidiary or agency
uses the bank's name with its solicitation or refers to its relationship to the bank
such that it appears to a customer that the bank may have a beneficial interest in the
sale by the bank affiliate, subsidiary or agency. All such disclosures shall, at a
minimum, clearly specify that:
(a) Insurance disclosures. In connection with the initial purchase of an insurance
product or annuity by a consumer from you, you must disclose to the consumer,
except to the extent the disclosure would not be accurate, that:
(1) The insurance product or annuity is not a deposit or other obligation of, or
guaranteed by, the bank or an affiliate of the bank;
(2) The insurance product or annuity is not insured by the Federal Deposit
Insurance Corporation (FDIC) or any other agency of the United States, the bank,
or (if applicable) an affiliate of the bank; and
(3) In the case of an insurance product or annuity that involves an investment risk,
there is investment risk associated with the product, including the possible loss of
value.
f the bank;
(2) The insurance product or annuity is not insured by the Federal Deposit
Insurance Corporation (FDIC) or any other agency of the United States, the bank,
or (if applicable) an affiliate of the bank; and
(3) In the case of an insurance product or annuity that involves an investment risk,
there is investment risk associated with the product, including the possible loss of
value.
(b) Credit disclosure. In the case of an application for credit in connection with
which an insurance product or annuity is solicited, offered, or sold, you must
disclose that the bank may not condition an extension of credit on either:
(1) The consumer's purchase of an insurance product or annuity from the bank or
any of its affiliates; or
(2) The consumer's agreement not to obtain, or a prohibition on the consumer from
obtaining, an insurance product or annuity from an unaffiliated entity.
The disclosure shall be made orally during any sales presentation, when advice
concerning insurance products is provided, and both orally and in writing prior to
or at the time insurance is sold. The minimum disclosures should also be clearly
conveyed in telemarketing contacts.
Brochures, signs, or other written material containing information about both
FDIC-insured deposits and insurance products should clearly segregate information
about insurance products from the information about deposits. Disclosure shall be
incorporated into all advertisements and other promotional materials. Abbreviated
disclosures in the manner permitted by the Joint Interpretation of the Interagency
Statement on Retail Sales of Nondeposit Investment Products will be acceptable for
osits and insurance products should clearly segregate information
about insurance products from the information about deposits. Disclosure shall be
incorporated into all advertisements and other promotional materials. Abbreviated
disclosures in the manner permitted by the Joint Interpretation of the Interagency
Statement on Retail Sales of Nondeposit Investment Products will be acceptable for

the insurance products which are the subject of these Guidelines, although these
Guidelines do not cover identical products.
The disclosure shall be presented in a clear and concise manner.
FOR THE FORM AND CONTENT OF THE WRITTEN DISCLOSURE AND
RELATED MATTERS, SEE: INSURANCE DIVISION BULLETIN 132, ISSUED
CONCURRENTLY WITH THIS REVISION OF BULLETIN 117, AND THE
FORMS ATTACHED TO BULLETIN 132.
Banks may provide any additional disclosures that further clarify the risks involved
with insurance, provided that overall disclosure remains short and readily
understandable to the consumer.
Confirmations and account statements for insurance products shall contain the
disclosure if the confirmations or account statements contain the name, trade name
or the logo of the bank or an affiliate. Abbreviated disclosures in the manner
permitted by the Joint Interpretation of the Interagency Statement on Retail Sales
of Nondeposit Investment Products will be acceptable for confirmations and account
statements for the insurance products which are the subject of these Guidelines.
Confirmations and account statements provided by third parties unaffiliated with
the bank need not make the disclosure on confirmations and account statements
that may incidentally, with a valid business purpose, contain the name, trade name
or logo of the bank
cts will be acceptable for confirmations and account
statements for the insurance products which are the subject of these Guidelines.
Confirmations and account statements provided by third parties unaffiliated with
the bank need not make the disclosure on confirmations and account statements
that may incidentally, with a valid business purpose, contain the name, trade name
or logo of the bank. If a customer's periodic deposit account statement includes
account information concerning the customer's insurance products, the information
concerning insurance products should be clearly separate from the information
concerning the deposit account and should be introduced with the disclosure and
the identity of the entity conducting the nondeposit transaction.
(D) Physical layout. Selling or recommending insurance products on the premises of a
bank may give the impression that the products are FDIC-insured or are obligations of the
bank. To minimize customer confusion with deposit products, sales or recommendations
of insurance products on the premises of a bank should be conducted in a physical
location distinct from the area where retail deposits are taken. Signs or other means
should be used to distinguish the insurance sales area from the retail deposit-taking area
of the bank. However, in the limited situation where physical considerations prevent sales
of insurance products from being conducted in a distinct area, the institution has a
heightened responsibility to ensure appropriate measures are in place to minimize
customer confusion.
In no case shall tellers or other employees, while located in the routine deposit-taking
area, such as the teller window, make general or specific recommendations regarding
insurance products, or evaluate a customer's eligibility for such products, even if initiated
by the customer. Tellers and employees who are not authorized to sell insurance products
may refer customers to individuals who are licensed insurance agents.
her employees, while located in the routine deposit-taking
area, such as the teller window, make general or specific recommendations regarding
insurance products, or evaluate a customer's eligibility for such products, even if initiated
by the customer. Tellers and employees who are not authorized to sell insurance products
may refer customers to individuals who are licensed insurance agents.

(E) Dual employees. An officer or employee of a bank may be an officer or employee of
an affiliated agency. An employee of a bank may perform both insurance and financial
functions.
(F) Financial Privacy. Use of customer financial information by a bank is restricted by
Vermont and federal law. The Financial Privacy Act (8 V.S.A. §§1021-1025) and the
Federal Fair Credit Reporting Act (15 U.S.C. §1681 et seq.) are applicable to use of
customer financial information for the purpose of selling insurance. Issues regarding
financial privacy will be addressed in a separate document by the Banking Division of the
Department.
June 13, 1997
July 2, 2001

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/VT_INS_B_117_20010702. Check the current official text before relying on it. Not legal advice.