In Wisconsin it is prohibited to make copies of vital records unless it is for bank use and stamped as such. Is it ok for the bank to fax vital records to an insurance company per a customer's request? It seems like that would be essentially making a photocopy of a vital record.

The bank should just refuse - it does not appear that a bank could even do it for their own use, only insurance companies under limited circumstances:

69.24 Penalties. (1) Any person who does any of the following is guilty of a Class I felony:
(a) Other than as authorized under s. 69.21 (2) (d), prepares or issues any paper or film which purports to be, or carries the appearance of, an original or a copy of a vital record, certified or uncertified, except as provided under this subchapter or s.
610.50 and except for any hospital which issues any written announcement of the birth of a person to the parents of the person if the announcement contains plain notice that the announcement is not for official use.

610.50  Vital records. An insurer or an employee, agent or attorney of an insurer is not subject to s. 69.24 (1) (a) for copying a certified copy of a vital record for the insurer's own internal administrative use in connection with the payment of insurance claims or benefits if the copy is marked “FOR ADMINISTRATIVE USE" and is retained in the files of the insurer or attorney.