Acting on Agent Licensing Reform

It seems like we have been talking about agent licensing reform since the discovery of fire. There has been lots of talk over the years, and not much action. But the fact remains that efficiency in agent licensing is the No. 1 issue for many agencies—and the problem is getting worse as agencies become larger and do more business across state lines. Many agencies have a full-time employee who does nothing but licensing compliance—it’s an unnecessary expense that is not producing business for the agency.

The NAIC and individual states have been trying to address the issue for decades, but the net result is that we still don’t have the reform we need. We thought the issue was addressed in the Gramm-Leach-Bliley Act (GLBA), which Congress passed in 1999. This law set the states on the path of reform and mandated licensing reciprocity for a majority of states, but this too has not resulted in reform. Too many states deviated in various ways from true reciprocity, and some big states never adopted it at all.

In 2004, the IIABA board adopted a policy of using targeted federal legislation to fix the insurance regulatory system, such as with the excess and surplus lines reform bill, which we have helped pass in the House twice and currently awaits action in the Senate. Now we are supporting a targeted bill on agent licensing, a provision that is already law in the GLBA. However, this updated National Association of Registered Agents and Brokers Act (NARAB), or NARAB II as it is being called, has some minor differences from the original provision.

First, it addresses only non-resident licensing, not resident licensing, and is therefore deferential to states’ rights. It also deals with agency (entity) licensing burdens. If you are satisfied with the current state licensing system, then this legislation won’t change your daily life one bit. However, if you are frustrated like many of your colleagues with the current state of affairs in non-resident agent licensing, you can choose to utilize NARAB II for your non-resident licensing needs.

NARAB II would operate as follows:

• Federal legislation would immediately establish NARAB as a private, non-profit entity managed by a board composed of state insurance regulators and marketplace representatives.
• State regulators would continue to license, supervise and discipline producers, and would continue to enforce state consumer protection laws.
• Membership in NARAB would be voluntary and would not affect the rights of a non-member producer under any state license.
• NARAB would establish membership criteria, which would include standards for personal qualifications, education, training and experience.
• Through NARAB, agent members would continue to pay the appropriate fees required by each state in which they are licensed and would renew their NARAB membership biannually.
• NARAB would coordinate with the states on establishing a central clearinghouse for license issuance and renewal and collection of regulatory information on producer activities.
• Any dispute involving NARAB would be brought in the appropriate U.S. District Court.
• NARAB would not be part of, or report to, any federal agency and would not have any federal regulatory power.

This is a very significant bill for independent agencies, whether you are licensed in just a handful of states or in all 51 jurisdictions. This bill is a great example of what the Big “I” does for you. We work on legislation to make your agency more efficient, more productive, more profitable and more competitive. We play offense and defense for independent agents on Capitol Hill. On NARAB II, we will be playing offense, and we want to move this bill into the end zone!

Bob Rusbuldt (bob.rusbuldt@iiaba.net) is president & CEO of the Big “I.”