Given the fact that getting an optional federal charter approved anytime soon is little more than a pipe dream, I hope the industry rallies around the latest proposal to use Uncle Sam not as the industry's ultimate regulator, but more as a facilitator to make multi-state licensing of agents and brokers more efficient. I also can't help but wonder why the same concept could not be applied to national insurance company licensing as well.
Yesterday, as reported by our own David Postal, the NARAB Reform Act was introduced in the House of Representatives by Rep. David Scott, D-Ga., and Geoff Davis, R-Ky.
The bill, reports Mr. Postal, "provides for one-stop non-resident licensing by establishing a National Association of Registered Agents and Brokers as a private, non-profit entity managed by a board composed of state insurance regulators and marketplace representatives."
The legislation would allow state regulators to continue supervising and disciplining producers, as well as enforce state consumer protection laws.
NARAB membership would be voluntary, with non-member producers free to remain licensed through their own respective states, without penalty.
Producers would have to submit to a national criminal background check for membership, and NARAB would have to coordinate with the states to create a central clearinghouse for licenses and broker activity.
For those producers doing business in multiple states, this seems to be a reasonable alternative to state-by-state licensing, with all the costs and hassles involved, without stripping the individual states of their consumer protection abilities.
NARAB was originally conceived by the Council of Insurance Agents and Brokers back in 1999. While it never made it as a stand-alone piece of legislation, NARAB did get tucked into Gramm-Leach-Bliley Act as a provisional measure--triggered only if a critical mass of states failed to achieve uniformity on producer licensing.
But while enough states cleared GLB's hurdle to head off NARAB's creation, most producers still complain that without complete compliance, multi-state licensing is still not nearly as efficient as it should be. Thus, even the Independent Insurance Agents and Brokers of America--no supporter of NARAB years ago, and certainly no backer of federal regulation--is solidly behind this latest legislative initiative.
CIAB, which would much prefer an optional federal charter, is offering qualified support at this point, taking issue with NARAB's proposed governance structure.
But other OFC backers, such as the American Insurance Association, are against the move, arguing that a national charter would be far more effective.
However, I would suggest that even if you support an OFC, the feds are not likely to put one in place. Washington already has its hands full, and isn't keen on creating an entirely new regulatory bureaucracy to directly supervise the sprawling insurance market.
And no matter who takes over the White House next year--whether he/she is a Democrat or a Republican--I cannot imagine an OFC would be very high on the legislative agenda, especially with the industry itself so bitterly divided over the issue. Legislation to enable creation of a NARAB facility would be far more politically feasible.
I would even go further, and propose a NARAB-type licensing entity for insurance carriers. The logic behind the basic concept is the same, is it not?
Passed in conjunction with a bill to set federal standards for regulation of reinsurance and surplus lines, many of the complaints about state regulation would be addressed, would they not?
What do you folks think?
Comments (6)
It seems reciprocal licensing or even multi-state licensing through a national system makes so much sense...it will never happen!
With current practice in all licensing, such as Professional Engineering, Safety, Investigations, and a multitude of others related to the industry, one state can't seem to accept the practice of another regardless of the levels and standards that state has impressed upon the individuals to meet.
Can you imagine the bickering that would result from asking a national consensus to allow licensing across all borders for companies and their programs and operations, with such passing freely from state to state?
That would have to happen to allow a true national licensing and frankly, I believe the states themselves will be the first to torpedo any national licensing agreements that don't allow them to have their usual "stranglehold" on the industry within their state.
Posted by BJ | March 14, 2008 12:09 PM
Posted on March 14, 2008 12:09
What would it take to get a national licensing bill for independent adjusters tacked unto the bill for agents?
We are now required to be licensed in most states to work catastrophe claims. This action would eliminate the process of licensing when a major event occurs.
Posted by Dennis Myhre | March 14, 2008 12:51 PM
Posted on March 14, 2008 12:51
Sam, you are quite correct that whoever gets in the White House will not address the OFC. With the economy stumbling, gas prices skyrocketing, and the conflicts in the world, any politician who addresses insurance regulation would be committing political suicide.
Your suggestion bears consideration as it has merit, but which federal bureaucracy will regulate the licensing?
SAM RESPONDS:
I am suggesting that the NARAB model be followed--a private, non-profit entity, acting with Congressional authorization and under federal managment and operational guidelines. I would imagine Treasury would have ultimate responsibility, but almost like an NASD (National Association of Security Dealers) setup.
Posted by Craig Dolan | March 14, 2008 1:08 PM
Posted on March 14, 2008 13:08
Hmmm, how about a group license, so a producer maintains one license for a group, instead of 10 or 20 or 30 for all the companies in the group? Wouldn't that be efficient for the producer, the companies, and the regulators?
BJ's comments identify why OFC is needed. The states will not voluntarily agree on a single standard.
Posted by Dreaming Big | March 17, 2008 12:44 PM
Posted on March 17, 2008 12:44
National agent licensing aside (a good idea, too) , I still maintain that OFC is badly needed to squeeze down the maintenance and compliance costs that few other industries have to deal with.
Can you imagine an auto industry that would have to build 51 diffferent versions of the same model to meet a myriad of state regulation? It would be absurd, as absurd as what we in the insurance industry face today.
Posted by William Safreed | March 20, 2008 8:35 AM
Posted on March 20, 2008 08:35
Now you're talking, Sam!
The concept of NARAB is the goal. However, when you use the words "the legislation," you are still talking "federal legislation." That is the dangerous part.
Wheras enacting the provisions of NARAB would be beneficial, it still needs to be coming from the NAIC, not through federal legislation.
If nothing else, maybe the language of the NARAB proposal has, for the first time, put into words the expectations that will satisfy the feds, and make them go away, and offer guidelines the industry will support.
It is now up to the NAIC to prudently and expeditiously enact those guidelines.
I still have faith in the states' abilities. We will see.
Posted by Dick Main | April 3, 2008 4:25 PM
Posted on April 3, 2008 16:25