Full Court Press for NARAB

Federal legislation is needed to bring about licensing reform—that’s the message agent Tom Minkler, chairman of the Big “I” government affairs committee, brought to a subcommittee of the House Financial Services Committee during a hearing on insurance regulation last month. The Big “I” has long asserted that the best method for addressing regulatory deficiencies is by enacting targeted legislation or federal legislative “tools” that establish greater interstate consistency and streamline redundant oversight.

The NARAB Reform Act, commonly referred to as “NARAB II,” employs the NARAB framework first developed by the Congress in 1999 and utilizes the experiences and insights obtained over recent years to improve upon the concept. Some might argue that the original law was not sufficiently clear, failed to set the bar high enough or enabled states to evade its reciprocity and uniformity objectives—but key improvements have been made to NARAB in H.R. 5611. Perhaps most notably, the NARAB Reform Act would immediately establish NARAB and provide agents and brokers with a long-awaited vehicle for obtaining and maintaining licenses on a multi-state basis. It eliminates barriers faced by agents who operate in multiple states, establishes licensing reciprocity and creates a one-stop facility for those who require nonresident licenses.

In order to join NARAB, an insurance producer must be licensed in good standing in his/her home state, undergo a criminal background check (long a priority of state insurance regulators but currently required by less than 14 states), and satisfy the independent membership criteria established by NARAB. These criteria would include standards for personal qualifications, training and experience, and—in order to discourage forum shopping and prevent a race to the bottom—the bill instructs the board to “consider the highest levels of insurance producer qualifications established under the licensing laws of the states. ”NARAB also would establish continuing education requirements comparable to the requirements of a majority of the states as a condition of membership, and the term of membership would be two years.

NARAB’s simple and limited mission would be to serve as a portal or central clearinghouse for license issuance and renewal. A NARAB member agent would identify the state(s) in which he/she sought the authority to operate, and NARAB would collect and remit the state licensing fees back to the appropriate jurisdiction(s). States would be prohibited from denying a nonresident license to any NARAB member who correctly completed the process and paid the fees. NARAB would operate as a private, non-profit entity and would be managed by a nine-member board of directors comprised of state insurance regulators and private sector representatives, similar to the board structure employed by NIPR. NARAB would not be part of, or report to, any federal agency and would not have any federal regulatory power.

The NARAB Reform Act discretely utilizes targeted congressional action to produce marketplace efficiencies and is deferential to states’ rights at the same time. H.R. 5611 merely addresses marketplace entry and leaves regulatory authority in the hands of state officials. The bill does not affect resident licensing requirements or producers who are satisfied with the current system. H.R. 5611 enables NARAB to work in concert with state regulators and NIPR in a number of ways, and NARAB would possess the authority to utilize the databases and infrastructure developed by NIPR in recent years. H.R.5611 does not displace state regulation and oversight of producers and instead achieves many of the public policy objectives that have been pursued by regulators.

NARAB II would build upon regulatory experience maintained at the state level and promote consistency, streamline procedures from state to state and preserve marketplace responsiveness. The result for all stakeholders would be a more efficient, modernized and workable system of insurance agent licensing.

Tom Koonce (tom.koonce@iiaba.net) is Big “I” assistance vice president for government affairs.

Treasury Blueprint Causes Concern

In late March, the Treasury Department released its Blueprint for a Modernized Financial Regulatory Structure (Blueprint). Overall, IIABA strongly opposes the Blueprint’s insurance recommendations, and believes that the Blueprint seems primarily to take into account the interests of large financial businesses operating on a national or international basis at the expense of smaller Main Street businesses, such as independent insurance agents and smaller insurance companies. Specifically, the Big “I” has a problem with the Blueprint’s proposal for the creation of an optional federal charter as well as its more expansive long term overhaul plan which would lead to mandatory federal regulation through a dual state and federal structure for state chartered entities and a single federal structure for federally-chartered entities. Of immediate concern to IIABA is the Blueprint’s recommendation of the creation of an Office of Insurance Oversight (OIO) within the Treasury Department. IIABA views the OIO as a serious threat to state insurance regulation because the Blueprint specifically envisions it as the intermediate step toward the creation of an optional federal charter. We believe that an OIO with authority to preempt state laws and implement their own regulations would negatively impact the state insurance regulatory structure.

—T.K.