Washington’s 2007 Legislative agenda targets license reform

The commissioner’s office feels the current process for licensing insurance agents and brokers in Washington is an antiquated, paper-dependent system lacking efficiency and interstate consistency rooted in a decades-old computer system patched and held together with the cyber equivalent of chewing gum and baling wire.

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Washington Insurance Com-missioner Mike Kreidler recently promulgated his agency’s proposals for the 2007 Legislative session. Of nine proposals, Sandi Peck, deputy commissioner of public affairs for the Washington commissioner’s office, said HB1533/SB5715 and HB1532/

SB5717 were particularly urgent and important to her agency.

Primarily, the commissioner’s office feels the current process for licensing insurance agents and brokers in Washington is an antiquated, paper-dependent system lacking efficiency and interstate consistency rooted in a decades-old computer system patched and held together with the cyber equivalent of chewing gum and baling wire. The department seeks to remedy their computer system while reforming licensing statutes via legislative proposals HB1533, dealing with licensing reform for agents and brokers, and HB1532, which calls for creating a market analysis program within the Washington Department of Insurance.

Licensing reform

If the proposals pass through the 2007 Legislature, the commissioner stands poised to introduce a modern licensing mechanism aimed at reducing delays, conserving resources and injecting national uniformity and reciprocity into a state-based process. Under legislation approved and funded in 2005, new technology and hardware is enabling the agency to realize savings, economies and efficiencies across several divisions and it touts early success with faster turnarounds on license applications and renewals. Added features allowing agents and brokers to print out their own licenses and update their license information online have apparently also helped to fine-tune the current processes.

Dan Holst, executive vice president of the Independent Insurance Agents and Brokers Association in Washington state, explained that HB1533 is an important bill for two reasons: “First it is a bill that is tied in nationally to the National Association of the Insurance Commissioners’ goal of standardizing licensing statutes throughout the country to make it easier for agents and brokers to do business in multiple states. And logistically, it would make it easier and less expensive for agents to do business because they would only need one license.”

Kreidler believes the most significant improvement for Washington will require the Legislature’s approval to adopt the producer licensing model, which would allow the agency to issue one license to both agents and brokers as a “producer,” eliminating the need for separate licenses. He said any changes would not affect the way agents and brokers conduct business as producers or with their customers and carriers, only the license and licensing process.

Peck reinforced the connection between Washington’s push for licensing reform at the state level and a similar national agenda to create a federal regulator for insurance. “Even though the political landscape has changed in D.C., we’re fully aware that there will be a push by the industry to create a federal regulator for insurance,” Peck said. “Our licensing reform and market analysis bills both attempt to address that.” She said 38 other states already have the type of model that Wash-ington is proposing.

PIA Western Alliance executive vice president, Clark Sitzes, said the PIA Washington supports the commissioner’s priority of reforming and modernizing the licensing process for insurance producers found in HB1533 and its Senate companion, SB5715. “We support the proposal to move toward a single producer license and to designate agents and brokers as producers,” Sitzes said. “There have not been problems in other states that have made this change and we see no reason to oppose this modification of Washington state statutes.”

A market analysis process

In an effort to modernize the regulation of insurance and create a more uniform approach to market conduct oversight, the National Association of Insurance Commissioners is promoting a new process called Market Analysis. This change to the regulation of market conduct is being driven at the national level in order to better focus limited resources on consumer protection.

Under current state law, the commissioner’s office must examine the market conduct of insurers at least once every five years involving an on-site review of records and practices relating to sales, advertising, underwriting, complaint handling, claims, rating and administrative procedures of insurance companies.

Kreidler wants to discover and respond to marketplace issues as they occur by utilizing market analysis, not the five-year exam cycle. He said the adoption of this new program would modernize Washington’s market conduct oversight approach and enhance its ability to protect consumers.

The new approach calls for an annual review of data covering all companies doing business in a particular state. Analysis of this data can be used to understand current marketplaces in a state, and point out areas where regulatory intervention is needed.

During Washington’s 2006 legislative session, supplemental budget funding was approved to begin the implementation of the Market Conduct Oversight program. Funding in the 2007-09 biennium is needed to fully implement the program.

Peck said this proposal will help replace the antiquated computer system in the commissioner’s office. “Up until now we have been operating on a 20-year-old computer system that predates the Internet,” she said. Peck added that the system’s replacement is a crucial component in the overall goal of streamlining the licensing process for agents and brokers in Washington.

With regard to Washington creating a market analysis program like that promoted by the NAIC, Clark said, “The PIA Washington is in favor of anything that allows for an easier process, whether it is online – as the OIC is leaning -or through the usual process of filling out papers and sending them to the department.”