The National Association of Registered Agents and Brokers Reform Act of 2013 (NARAB II) has been introduced in the House (H.R. 1155) and Senate (S. 534). The legislation would create a national clearinghouse for insurance agents and brokers to obtain approval to operate on a multi-state basis. NARAB would be governed by a Board of Directors dominated by state regulators and would establish standards for membership that meet or exceed the existing requirements in any state. A prospective NARAB member would be required to be fully licensed in his or her home state and satisfy rigorous membership criteria for the national organization. An approved NARAB member could utilize the clearinghouse to obtain approval to operate in any other state.
What NARAB II would do:
- Preserve state-based insurance regulation and consumer protections.
State insurance commissioners would continue to be responsible for regulating market conduct and policing unfair trade practices within their jurisdictions. They would continue to regulate products sold in their states by ensuring that policies comply with state laws and are not misleading or unfair to consumers.
- Make it easier for consumers to maintain important relationships with their insurance advisors.
Under the current system, a consumer who moves to a different state and wants to maintain an existing relationship with his or her insurance advisor is most likely out of luck. The agent is prohibited from doing business with the client unless the agent obtains a license (often only with great effort and expense) in the client’s new state. Some 80 percent of NAIFA members have lost clients who moved to states in which they were not licensed; 12 percent report that they have lost more than 50 clients this way. NARAB II, in many cases, would enable consumers to continue to work with agents they trust, no matter where they live in the United States.
- Enhance consumer protections
Most states do not require that an agent pass a criminal background check prior to licensure. NARAB II would require that all NARAB members pass a federal criminal background check.
- Streamline licensing requirements for agents licensed in multiple states.
Currently, an insurance agent who has clients in more than one state has to obtain licenses in each of those states. The regulatory process varies from state-to-state. Obtaining and maintaining a license is time-consuming. Having to complete the process over and over compounds the difficulty and often proves daunting for agents who are trying to meet the needs of their clients. The NARAB clearinghouse would allow agents to complete the process twice (once for his or her home state and once for NARAB) and be eligible to sell and service policies in all states.
- Reduce the time agents spend dealing with licensing red tape.
A survey of NAIFA members found that they spend an average of 29 hours per year complying with insurance licensing requirements and an additional 28 hours per year on insurance-specific continuing education courses needed to maintain their licenses. This time spent can be much greater for agents licensed in a half dozen, a dozen, or more states. By simplifying the licensing procedure for agents doing business in multiple states, NARAB II would save agents' time. It would also standardize CE requirements for all the states other than an agent’s home state.
What NARAB II would NOT do:
- Deregulate the insurance industry.
NARAB II deals solely with agent licensing, not the day-to-day regulation of insurance agents, products or companies. States would continue to regulate the insurance industry, just as they always have.
- Create a federal insurance regulator.
See above. NARAB would not be part of any federal agency and would have no regulatory authority. Its members would include eight state insurance commissioners (who would make up a majority of the Board) and five members with demonstrated expertise and experience with insurance licensing qualification requirements. States would continue to regulate the insurance industry, just as they always have.
- Exclude those promoting consumer protections from the Board.
State insurance commissioners will hold eight of the 13 positions on the NARAB Board. They are either elected or appointed in their states to regulate the insurance industry and ensure that consumers are protected. As government officials, they are accountable to the public. Additionally, the legislation would require the NARAB Board to establish a consumer complaints office.
- Dilute consumer protection.
The NARAB Board would coordinate its disciplinary efforts with the states. The law would in no way restrict the states’ powers to discipline NARAB-licensed agents and suspend their licenses within their jurisdictions. The legislation requires the NARAB Board to create a rigorous licensing standard. It “shall not adapt any qualification less protective to the public than that contained in the NAIC Producer Licensing Model Act …, and shall consider the highest levels of insurance producer qualifications established under the licensing laws of the States.”
- Force agents to participate in the federal NARAB program.
Membership in NARAB would be voluntary. An agent could continue to obtain multiple licenses from individual states if he or she chose to do so.