National Insurance Producer Licensing Bill Reintroduced in Congress

Federal legislation designed to streamline licensing for insurance agents and brokers operating in multiple states has been reintroduced in Congress.

The legislation (HR 2554), the National Association of Registered Agents and Brokers Reform Act of 2009, or NARAB II as it is known, was introduced by Rep. David Scott, D-Ga., and Rep. Randy Neugebauer, R-Texas.

The bill would establish a national organization, NARAB, which producers could join that would be responsible for establishing one set of licensing, continuing education, and other insurance producer qualification standards that would be applicable in all states in which they do business.

While establishing a national licensing system, it would still allow states to license, supervise, discipline, and establish licensing fees for insurance producers.

Similar legislation, H.R. 5611, passed the full House in September 2008 but never attained a Senate vote.

The Independent Insurance Agents and Brokers of America (Big “I”), which says “tens of thousands” of its members operate in multiple states, expressed strong support for the bipartisan legislation.

“Throughout the current financial crisis, the state insurance regulatory system continues to show how well it protects both individual consumers and businesses,” said Brett Nilsson, Big “I” chairman. “Although the system has worked effectively to ensure insurer solvency and look after policyholders, the system does need improvement in the area of agent licensing. NARAB II would reform and improve the current state-based system of insurance regulation by providing one-stop, non-resident licensing reciprocity.”

In addition to creating reciprocity in licensing for multi-state producers, the bill would foster greater competition among agents and brokers who become part of NARAB, according to the Big “I.”

Agents, who otherwise support state regulation, are backing the creation of the NARAB national licensing organization in part out of frustration with the efforts by state insurance departments and the National Association of Insurance Commissioners (NAIC) to achieve reciprocity in licensing rules and procedures.

Robert Rusbuldt, Big “I” CEO and president, said his organization believes that the state system can’t effectively address certain regulatory problems and there is a role for Congress to play in helping to modernize state regulation. “The NARAB Reform Act is such targeted reform as it only relates to marketplace entry and would not impact the day-to-day state regulation of insurance,” he says.

Reciprocity among states — whereby states license non-resident producers on a reciprocal basis and do not impose additional requirements– has been a goal since the Gramm-Leach-Bliley Act of 1999 put states on notice that a national licensing agency would be established if they could not achieve reciprocity among 29 states. By 2001, 35 states were in compliance and since then additional states have joined the fold. Forty-seven jurisdictions are now recognized by the NAIC as having met the reciprocity mandates of the Gramm-Leach-Bliley Act. But some large states, including New York, Florida and California, are not in compliance.

A NAIC report released in March identified areas where the states’ reciprocity and uniformity initiatives need improvement, along with areas where such efforts have been successful.

“The updates demonstrate that the NAIC’s producer-licensing reform strategy is working, showing significant progress in the past year,” said Alaska Insurance Director Linda Hall, who is chair of the NAIC Producer Licensing Task Force, about the report.

The National Association of Mutual Insurance Companies (NAMIC) also applauded the NARAB II legislation, arguing that in addition to streamlining state regulation, it would ultimately lead to more choices and lower costs for insurance consumers.

“This legislation is a great example of a way Congress can have a targeted role in helping to streamline and modernize the current insurance regulatory system,” said Marliss McManus, NAMIC’s senior federal affairs director. “It simplifies the system for insurance agents and brokers to become licensed across state lines – giving consumers more insurance alternatives.”