In a move reflective of the changing bank industry, the Massachusetts Bankers Association has announced the formation of a new division focused on insurance.

The Massachusetts Bank Insurance Association was launched last week and will be a separate division under the umbrella of the MBA.

According to Kevin F. Kiley, executive vice president, the MBA had been studying how it could foster the growth of bank-owned insurance products in the commonwealth over the past six months. It became evident that an additional entity devoted to the numerous issues related to insurance was necessary, he said.

The MBIA will target regulatory and legislative issues as well as offer educational products for members.

The formation of the MBIA is timely because since 1998, when banks gained the legal authority to sell insurance, more than 60 banks have either filed an application to sell insurance or are already selling it, said Kiley. He added that he expects that number to grow quickly.

“I think there was clearly a need. We were approached by individual agents. We were approached by banks who had purchased agencies that said, ‘Hey, there’s a real need in the marketplace to have a more unified voice to start to speak about the role bank insurance sales plays here in Massachusetts,'” he said.

“We’re thrilled,” said Brian Stewart, senior vice president and chief investment officer of Middlesex Savings Bank in Natick and president of Weathervane Insurance Agency, a subsidiary of the bank.

“The bank’s very excited to have a new trade association to support our insurance activities. It will provide the banks a new unified voice in legislative and regulatory issues pertaining to the sale of insurance by banks,” he said. Stewart will also sit on the board of the new association.

Ken Ehrlich, a partner with Boston-based Peabody & Arnold who leads the firm’s community bank practice group, said the new association will greatly benefit his bank clients.

“It creates a separate vehicle for banks in the insurance business to band together and address areas of common concern,” he said.

Ehrlich represents eight banks which are licensed to sell insurance. At a certain point in any industry, when the number of entrants reaches a critical mass, creating a vehicle for them to advance their interests becomes important, he said.

‘Exciting Effort’
There’s still some adjustments to be made, said Kiley, such as choosing a president and deciding the price of associate memberships.

“We anticipate as the program starts to take shape and we begin to reach out to the individual banks and individual agents and agencies that work with banks, we’ll continue to fine-tune the overall objectives. We think it’s an exciting effort that will be helpful for the industry we represent and the insurance agency,” said Kiley.

Despite the fact that there are associations for bankers and others for insurance professionals, there is a need for a bank insurance association, said Ehrlich.

While the sale of insurance is an industry that is hundreds of years old in this country, up until Aug. 21, 1998, it was illegal for banks to sell insurance, he explained.

“[Banks are] subject to a set of pretty rigorous restrictions. These rules are consumer protections that are designed to make sure that customers don’t confuse traditional banking products with the insurance products which are not federally insured. And to prevent banks from using their powers in traditional markets to pressure their way into insurance products,” Ehrlich said.

The trade association will advance the common interests of its members and will serve several functions including educational, training, public advocacy, compliance and social, said Ehrlich.

The association will provide a forum for bank insurance marketing and sales professionals to network and share ideas as well as offer an effective vehicle to communicate to consumers and the media the benefits of insurance sales through banks, said Stewart.

“We recently met with regulators on various issues that are pending both before the Division of Banks and the Division of Insurance. They’ve been very helpful and encouraging to us about this whole effort of starting to get a focus on how bank insurance is operating here in Massachusetts and ways we can improve it,” said Kiley.

The issues banks will have to contend with in relation to insurance sales are numerous, said Kiley. “Some are going to have an interest in property and casualty, some are going to have areas of annuities or life sales. Each and every bank is going to have different types of products and services they’re going to want to offer.”

Kiley identified several different bank/insurance relationships members will fall under. For example, banks may create a brand new insurance program that they’ve built from the ground up; the bank could have purchased an independent agency; a referral program between the bank and an independent or outside agency could be established; or it could be a combination of a “multifaceted” program which banks buy into such as Infinex.

Membership in the association will be fairly straightforward.

“Basically, members of the association will be entitled to participate through their agencies. We also will look at potentially creating associate memberships for entities that do business with banks. But all those issues we’re in the initial stages of working out,” said Kiley.