NAIC Vice President, Insurance Industry Representatives Support NARAB II Legislation at U.S. Senate Subcommittee Hearing

 

At a hearing entitled “Streamlining Regulation, Improving Consumer Protection and Increasing Competition in Insurance Markets” held yesterday, March 19, 2013, the U.S. Senate Banking, Housing and Urban Affairs Subcommittee (“Subcommittee”) on Securities, Insurance and Investment heard testimony in support of the proposed National Association of Registered Agents and Brokers Reform Act of 2013, also known as NARAB II. 

This legislation would create the National Association of Registered Agents and Brokers (“NARAB”) in an effort to streamline non-resident market access for insurance producers.  NARAB’s governing board would consist of 13 members, eight of which must be state insurance commissioners.

National Association of Insurance Commissioners (“NAIC”) Vice President Monica Lindeen testified at yesterday’s hearing, saying that the bill achieves the goals of improving the non-resident licensing process, while maintaining states’ existing authorities-a component that was critical to the NAIC’s support.

“NARAB represents a unique and very narrow case where federal legislation can be used to streamline a process while preserving state authority, and should not be interpreted to suggest support for any further pre-emption of State insurance laws,” she said. “Insurance regulatory reform should always begin and end with the states.”

To view an NAIC letter sent to Congress earlier this month in support of the legislation, click here.

Having passed the U.S. House of Representatives twice before, the NARAB II legislation has its roots in the Gramm-Leach-Bliley Act of 1999 (“GLBA”), which contained a provision to create the NARAB as a non-profit corporation if uniformity and reciprocity of the insurance producer licensing and qualification process on a multi-state basis was not achieved through other reforms. 

In 2000, the NAIC adopted the Producer Licensing Model Act and subsequently found that 47 states had met non-resident producer licensing reciprocity requirements under the GLBA.  Therefore, what is known as NARAB I was not created at that time. 

According to testimony given yesterday by Baird Webel of the Congressional Research Service, the three non-participating states are California, Florida and Washington.  This has hindered the full achievement of nationwide reciprocity due to those states’ large share of the population.

“The states have worked for years to devise a system to overcome the obstacles created by 56 different jurisdictions. . .” testified Scott Trofholz on behalf of the Council of Insurance Agents and Brokers (“CIAB”).  “The pace of interstate activity in the insurance marketplace has outstripped the pace of reform efforts in individual states.”

He described several key functions of the NARAB organization that would be created, which include:

• A clearinghouse for processing insurance producer licenses, which would avoid duplication of paperwork and effort on a state-by-state basis
• The issuance of uniform insurance producer applications and renewal applications for the issuance or renewal of state licenses
• The development of uniform continuing education standards and/or the establishment of a reciprocity process for continuing education credits
• A national licensing exam process
• Utilization of a national database for the collection of regulatory information concerning the activities of insurance producers

On behalf of the Independent Agents and Brokers of America (“IIABA”), that organization’s Government Affairs Committee Chairman Jon Jensen spoke about the need for the bill.

“[Some people] mistakenly believe that most insurance agents operate only within the borders of the state in which they are physically located . . .” he said, adding that it is no longer the norm for agencies to service clients in just one or two states.

Mr. Jensen testified that not only does his own firm spend tens of thousands of dollars annually on licensing fees, but that there is a significant cost in terms of staff time spent on maintaining hundreds of licenses and responding to duplicative state requirements and document requests. 

He said that approximately 60 percent of IIABA members dedicate a staff member to the procurement and maintenance of licenses for their respective agencies and personnel.  He added that, on average, 3 percent of insurance agency operating expenses are spent on licensing compliance efforts, with the smallest agencies spending 4.3 percent.

“The need for effective licensing reform is greater than ever,” Mr. Jensen concluded.

Click here for NAIC information on producer licensing.

To access written testimony of each witness who spoke, click on the hyperlinks below.

• The Honorable Monica J. Lindeen [view testimony]
  Commissioner of Securities and Insurance
  Montana State Auditor, on behalf of the National Association of Insurance Commissioners
• Mr. Jon A. Jensen [view testimony]
  Government Affairs Committee Chairman, Independent Insurance Agents and Brokers of America
  President, Correll Insurance Group
• Mr. Scott Trofholz [view testimony]
  President and CEO
  The Harry A. Koch Company of Omaha, Nebraska, on behalf of the Council of Insurance Agents and Brokers
• Mr. Baird Webel [view testimony]
  Specialist in Financial Economics
  Congressional Research Service

To access an archived Webcast of yesterday’s hearing, click here.

 

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