Opening Music Plays
ANDY MOYER: Welcome to NAIFA’s GovPod, the podcast about important legislative issues affecting the insurance and financial services industry. I’m Andy Moyer, communications producer for NAIFA. In our January GovPod, we explored the potential pros and cons for NAIFA members of the optional federal charter, a national insurance regulatory proposal gaining momentum in Congress. And while the issue of federal regulation is important, the states are now and will remain a driving force behind insurance regulations.
NAIFA is fully committed to helping states improve their regulatory systems and protecting the interests of NAIFA members. In this podcast, we’ll hear how state regulators and legislators are responding to the concerns of NAIFA members and what NAIFA’s doing to help. To discuss these important matters, I’d like to welcome NAIFA’s Senior Vice President of Law and Government Relations, Bill Anderson, and NAIFA’s General Counsel, Michael Gerber. Bill, Michael, thank you for joining us on our GovPod today.
MICHAEL GERBER: Our pleasure.
BILL ANDERSON: Yes. Glad to be here.
ANDY MOYER: Bill, can you tell us why there’s a call to improve state insurance regulation and what the states are doing about it?
BILL ANDERSON: Well, with over fifty jurisdictions, there is a tremendous lack of uniformity among state regulation. But working together, as the National Association of Insurance Commissioners, the NAIC, state insurance regulators have met the challenge of federal efforts to reform insurance regulation by putting together their own plan to modernize insurance regulation. The NAIC’s modernization plan seeks to improve state regulation by tackling many of the same issues addressed by federal proposals such as streamlining the agent licensing process and improving the speed to market conditions for insurance products.
ANDY MOYER: You mentioned the agent licensing. Why is this an issue?
BILL ANDERSON: Because there are tremendous differences in agent licensing rules throughout the country, there are obstacles to non-resident licensing. And there are tremendous costs for the agent associated with attempting to comply with all the various regulations throughout the country.
ANDY MOYER: Michael, have the states done anything about their inconsistent agent licensing laws?
MICHAEL GERBER: Absolutely. You know, in light of all the problems that Bill just briefly summarized, the states have done quite a lot in the last ten years or so to streamline the agent licensing process and to help make it more uniform nationwide. Um, back I guess in around 1999 when Congress passed the Gramm-Leach-Bliley Act, the states were really forced to take action in this area and to start cleaning up their inconsistent licensing rules for the first time. Because if they didn’t, then they face the prospect that a federal entity was going to be created that was going to handle the agent licensing system for them. And the main impetus for this sort of federal legislation was to remove barriers to obtaining nonresident licensing.
So the NAIC took action. They responded to this federal threat and they developed what’s called a Producer Licensing Model Act or the PLMA. And that’s the type of basic framework for state agent licensing regulation. And by now, most states have adopted the PLMA in one form or another. And that’s made state licensing laws much more uniform than they ever were before. And in addition to that, the NAIC has since then adopted a set of uniform resident licensing standards.
And that’s meant to help encourage states to achieve greater uniformity in actual licensing requirements in areas like pre-licensing education and continuing education and license terms, how long ... how long a license is in effect. But having said all that, as Bill mentioned, there’s still a lot of inconsistency in agent licensing rules from state-to-state and a lot of areas for improvement in the agency licensing system. Fortunately, states have made a lot of headway in the past few years for making licensing laws more consistent around the country than they were before.
ANDY MOYER: How have these licensing laws impacted NAIFA members and other insurance agents?
MICHAEL GERBER: Well, the implementation of PLMA across the country has definitely made the licensing process easier for agents than it was in the past. I mean, for NAIFA that’s the real goal of trying to improve the agent licensing process. We know that the less time members spend filling out licensing paperwork, the more time they have to do what they want to do. And that’s going out to help families and businesses achieve financial security. And one recent achievement for the states in this area has been the development of online agent licensing systems by NIPR, the National Producer Licensing Registry.
The development of NIPR, which is an affiliate of the NAIC, owes its success in large part to this greater consistency that we now have in agency licensing laws thanks to the PLMA. And what the online NIPR system does is it allows agents with active resident licenses in any state to apply for a nonresident license for multiple states, all with a single form, all done online at one time with a very quick turnaround time. And this is a vast improvement from a few years ago, when all nonresident licenses had to be applied for with separate forms that you had to fill out by hand and mail in to the separate insurance departments all over the country with a much slower turnaround time.
And by the way, you can access this online, nonresident licensing system through NAIFA’s website. And NIPR has had other developments in recent years. One is a request system that lets agents complete address changes from multiple states using a single online form. And they have a growing system of online resident licensing. When you put this all together, you can see that a lot has been done to make the agent licensing system much easier for NAIFA members. And this is all thanks to the greater uniformity that we’ve seen in state agency licensing laws.
ANDY MOYER: So, Bill, is NAIFA doing anything to help the states?
BILL ANDERSON: Absolutely. Um, it is a number one priority for NAIFA to support uniformity in agent licensing throughout the country. We work very closely with the NAIC on the various projects that they have embarked upon. We have a seat on the NIPR board. And state associations have been very helpful in supporting passage of the Producer Licensing Model Act throughout the country. The latest development by the NAIC is a broad-based coalition of industry and regulators to actually go out and assess and rate every one of the states to see whether they are in compliance with the requirements of Gramm-Leach-Bliley and the NARAB requirements under there and the reciprocity that is afforded throughout the country. And the idea is to identify those pockets, those problems, that are still out there that are impediments to uniformity and then address them state-by-state.
ANDY MOYER: Now, aside from causing licensing headaches, inconsistent regulations have often kept producers from bringing new products to market quickly. Michael, can you tell us what the states are doing about that?
MICHAEL GERBER: Sure, Andy. The insurance industry has long had a speed to market problem in getting new, innovative products to consumers. And the problem has always been this: a company that wants to introduce a new product has to file it separately in every state which they want to offer it. And every state has different rules and different forms and different review procedures. And this, obviously, is a very costly and time consuming enterprise for insurers. And that can add months or even years to the time it takes to get a new product to reach the market.
This inefficient process that the states currently have puts the insurance industry at a serious competitive disadvantage compared to the banking and securities industry, which can often introduce products nationwide after approval from only a single regulator. So the NAIC developed the Interstate Compact to solve this problem. The compact is an agreement among states to create a single point of filing to new insurance products. And it covers life insurance, annuities, disability income and long term care insurance. All the states that adopt the compact law agree to a uniform set of standards for product review and approval. And once a company’s filing is approved by the compact commission, the company can sell that product in any compacting state.
ANDY MOYER: And what’s NAIFA’s position on the Interstate Compact?
BILL ANDERSON: NAIFA has from the very beginning supported the Interstate Compact. We were heavily involved in the development of the compact with the NAIC. Our state associations have been very helpful in promoting the enactment of the compact in the various states. And NAIFA and AHIA each have a seat on the industry advisory committee to the compact. So we are constantly involved as the compact is evolving.
ANDY MOYER: Have the states had success putting the compact into operation?
MICHAEL GERBER: They sure have. I mean, this is a real success story for state regulation. The compact has moved very fast. In fact, I think it’s the fastest adopted compact that we’ve had in our nation’s history. It was adopted by the NAIC in 2003. And by 2006, it already had been adopted by 26 different states and began to set up its operation. The compact now has 30 member states. And that represents about 50 percent of the premium volume for the covered products. And it has already begun approving products for several companies with a turnaround time of less than sixty days.
What NAIFA would like to see is that the compact is adopted in every state. And we’re happy to see that compact legislation is currently pending in several states. Unfortunately, it’s really hard to tell if all states will ever agree to join the compact, including some of the country’s largest states with the biggest markets, and how long nationwide approval will really take. And another challenge for the compact is having the companies themselves file with the compact commission now that it’s open for business. And unless more companies step up and use the compact, it’s not very useful to have it. So we’re going to have to wait and see if company usage increases over the next year or so.
ANDY MOYER: And Bill, what is your impression of the state of the states as they try to improve regulation of the industry?
BILL ANDERSON: Well, we’re never going to avoid the difficult of achieving uniformity with over fifty different jurisdictions. However, we continue to try. I think it’s extremely helpful that the states are now motivated through the NAIC to improve the state system in order to avoid potential federal regulation. And NAIFA will continue to support these state efforts to improve state regulation, to help NAIFA members and the clients that they serve.
ANDY MOYER: Finally, why should NAIFA members care about these issues? And how can they help? Bill, you want to answer this?
BILL ANDERSON: Well, certainly an improved system of state regulation that is more uniform will assist agents in ease of insurance agent licensing. The speed to market efforts will allow them to have more products to sell to their clients and remain more competitive with the other financial services industries. And they can help by supporting our efforts in the states when we need help enacting legislation and regulation and responding to action alerts when we call for action that is necessary to implement a lot of these efforts.
ANDY MOYER: Bill, Michael, thank you very much for joining us today on our GovPod.
MICHAEL GERBER: Thank you, Andy.
BILL ANDERSON: Thank you.
ANDY MOYER: For more information on this and other GovPods, please visit the NAIFA website at www.naifa.org\advocacy. Membership in NAIFA is all about your success. We give you the tools you need to grow your business and propel your career as an insurance or financial adviser. Learn more about becoming a NAIFA member and join today at www.naifa.org\join. This 2008 podcast is a copyrighted production of the National Association of Insurance and Financial Advisers. All rights are reserved.
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