Opening Music Plays
ANDY MOYER: Welcome to NAIFA’s GovPod, the podcast about important legislative issues affecting the insurance industry. I’m Andy Moyer, Communications Producer for NAIFA. Lately there’s been a lot of discussion on Capitol Hill about the federal role in insurance regulation. An agent licensing proposal called NARAB II has been gaining traction with several members of Congress. Today we’re speaking with Scott Sinder and John Fielding of the D.C. law firm Steptoe and Johnson, an outside counsel to NAIFA. Scott, John, thank you for joining us on our podcast today.
SCOTT SINDER: Thanks for having us.
JOHN FIELDING: Happy to be here.
ANDY MOYER: All right, John, let’s start with you. Why don’t you tell us what NARAB II is.
JOHN FIELDING: NARAB II is a proposal that would allow agents and brokers to have a single point of filing for their non-resident licenses. Essentially, the NARAB entity would be created, the entity itself would be comprised of regulators, industry and other, I suppose, interested individuals who would be appointed by, as it’s currently proposed, the President, and the entity would essentially set standards and provide for the licensing structure so that a—an agent or broker who has a resident license in the state could then apply to NARAB and obtain non-resident licenses in one or all the other states and jurisdictions in the United States.
ANDY MOYER: What’s the difference between this and the optional federal charter? Scott, can you explain that to us?
SCOTT SINDER: Sure, Andy. The optional federal chartering proposal is a broader proposal that would encompass insurance company chartering, as well as kind of market conduct, and it’s cradle-to-grave regulation for those who opt into the system, both carriers and producers. I kind of view the proposal as an OFC for agents. It’s just more limited in that it’s only a licensure piece and doesn’t cover the other areas of regulation that a full-blown optional federal chartering regulator would.
ANDY MOYER: What exactly prompted this NARAB proposal?
SCOTT SINDER: In the original version of NARAB what it basically did is it set up a bogey. It said that unless a majority of the states and territories, which if you add it all up is 29, unless 29 states establish either reciprocal or identical licensing regimes for agents and brokers, then there will be created an entity called the National Association for Registered Agents and Brokers (NARAB). The problem is… There are several problems. One is not enough states really hit the bogey from a pragmatic perspective and some of the states that didn’t are the big states.
California, Florida, for example, they are not part of the reciprocal licensing regime that many of the states established, and so you have this non-participation. The second problem is that the original legislation excluded agencies. It only applied to individual licensure. And so there’s a basket of problems associated with agency licensure. Those went unaddressed in ’99. The new proposal would seek to resolve these. It would go ahead and immediately establish what’s, in essence, a federal licensing entity.
ANDY MOYER: What are the prospects for its passage?
SCOTT SINDER: You know, my view is that in the near term the prospects are difficult because some of the initial supporters of this bill, they are seeking to have it enacted partially in an effort to resolve the agency licensure issues but also in an effort to try to basically obviate the need for the creation of a broader, optional federal regulator. And you can sort of see the problem with that. One of the most visible problems is that it’s gonna become the kind of—the puppet in the debate between those who wanna know option federal charter and those that don’t.
You see this even more profoundly in the way they’ve tried to structure this new entity. This is an entity that has two levels of federal power. It has the federal power to create licensure standards, who is it that’s eligible to be a member of NARAB, and that membership gives you federal benefits. And the benefit is that by paying a fee you’re automatically licensed in any other state you want to as long as you pay the fee associated with each individual license.
The second federal power that they have is to determine who it is that’s satisfied their rules. This is sort of typical federal regulatory power. I think, from the NAIFA perspective, while we are still exploring what the ultimate position of the—of the trade association should be with respect to the larger questions, there’s no innate fear or hatred of a federal presence. It’s more how that would be constructed, what it would mean in the real world.
And so if you … I think if we argued that this is an optional federal regulatory regime for life insurance agents, I don’t know that that’s inherently problematic in any way from our trade association’s perspective.
JOHN FIELDING: This is also a means, I think, of pushing the states and the state regulators to continue to reform and push for modernization of the producer licensing regime across the country. And in that way NARAB II, like OFC, like other federal efforts, can be helpful to NAIFA in terms of accomplishing some reform goals even just by the fact of it being out there.
ANDY MOYER Now why should our NAIFA members really care about this proposal? How is it going to directly affect their business?
SCOTT SINDER: It affects any licensed agent or broker that’s doing business in more than one jurisdiction. But if you’re somebody who does business in several states or you’re doing group business on a national basis, then what this should do, if it’s properly effectuated, is it should greatly reduce your licensure burden costs, because rather than having to satisfy all the different state requirements and all the different state schedules for licensure, which is probably most important, you’d be able to do it with a single, seamless process once a year. And so I think that it should become a much easier burden to satisfy.
ANDY MOYER: You wanna add anything, John?
JOHN FIELDING: I think we’ll see a streamlining of some of the requirements across the states as well because I think it does put pressure on the states to come together in terms of some of their whether it’s administrative requirements or substantive requirements in terms of licensing.
SCOTT SINDER: You know, one point I’d like to make clear is that it’s not gonna mean that anyone that’s any less qualified than they have been historically can be licensed. In fact, to be qualified to be eligible for the NARAB privileges of this multistate licensure the statutory language will dictate that standards have to be established that match the highest standards of any state. And so you’re gonna have to be a well-qualified life agent, for example, in order to qualify for these benefits.
ANDY MOYER: Is there anything that our NAIFA members should be doing about this proposal?
SCOTT SINDER: I think at this point it’s something that we’re watching very closely and that once we actually see a real proposal… Remember, we have not seen final legislative language and so it’s not a concrete proposal yet. We need to make sure that it satisfies all the NAIFA objectives that we’re trying to accomplish in the licensing realm, and if it does, at the right moment I think that the NAIFA government relations staff will send out the call to arms in order to get folks to weigh in with their members of Congress with their support of the proposal.
JOHN FIELDING: With all of these proposals, I think one of the most important things that NAIFA members can do is keep up to speed on what’s going on. And I think that the NAIFA government relations group, I know they send out a lot of information about what’s going on here in Washington and I think to stay educated and to stay up to speed on things so that members themselves can give feedback both to the government relations group at NAIFA and to the Hill as necessary is a really good idea.
ANDY MOYER: John, Scott, thank you very much for being on our podcast and giving your information to us. We really appreciate it.
SCOTT SINDER: Well, thanks for having us. We’re [sic] always love to be with NAIFA.
JOHN FIELDING: Our pleasure.
ANDY MOYER: NAIFA encourages you to learn more about NARAB II by logging onto NAIFA’s website at www.naifa.org. 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 advisor. 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 Advisors. All rights are reserved.
END
Recent Comments