State Farm, the nation's largest property and casualty insurer, made Internet banking available to its employees Jan. 23 and will offer it to customers nationwide this spring. State Farm also plans to train agents in every state to offer banking services, but has so far limited services through trained agents to Missouri and Illinois.

The Internet is key to allowing the company to quickly roll out banking services to all of its customers, says Stan Ommen, State Farm Bank's CEO and president. "It gives us the opportunity to go nationwide sooner than if we waited to train all 16,000 of our agents," he says. The Bloomington, Ill., insurer, which reported $25.7 billion in revenue from premiums in 1998, formed the bank in mid-1999.

Speed is important in the changing financial-services industry. A federal law approved in November undid a law that kept the banking and insurance industries separate. The new ruling means insurance companies could lose clients to traditional banks that launch insurance services-particularly in an era when consumers are consolidating more of their finances with one company.

Insurance companies had offered personal banking services under a law regulating the savings and loan industry. But the new rules, which take effect March 12, clear away the regulatory maze. "It will be open season for affiliations of insurance and banking companies," says Michael Lovendusky, assistant general counsel for the American Insurance Association.

State Farm initially will offer Internet customers checking, bill-payment, and savings-account services. It plans to offer loans later this year. State Farm Bank had $52.1 million in deposits and $40.8 million in loans as of Dec. 31.

State Farm isn't the first insurer to go this route. Principal Financial Group, a pension-management and insurance company in Des Moines, Iowa, launched a "virtual" bank in 1998; customers do all of their business by Internet, phone, mail, or automated teller machine. Last month, the bank announced its first quarterly operating profit of $40,000 on assets of $113 million.