House panel passes NARAB bill

The effort to streamline insurance agent licensing has been underway for more than 20 years. The Gramm-Leach-Bliley law of 1999 called it to be implemented in 2003 unless at least half the states adopted "reciprocal" licensing laws governing nonresident licensing.  The creation of NARAB itself was averted when 29 states did so – as mandated under the law. 

However, momentum has been re-established for NARAB because industry officials have argued that, despite these efforts at reciprocity, the full promises of the original NARAB law have not been met, as the administrative burdens of state-by-state licensure have grown, not diminished. 

The legislation is modeled after the National Association of Securities Dealers (NASD) and will be a completely voluntary, self-regulating organization.  On a purely voluntary basis, agents and brokers can apply to NARAB for membership.  Upon meeting the NARAB criteria, they can use the agency essentially as a "passport" system for multi-state licensure.  NARAB's membership criteria will be established by a board that is dominated by state insurance commissioners. 

"The big concession we've made is on governance – that a majority of the governance has to come from state insurance commissioners," one lobbyist involved said. That, however, has stirred some concern.

In proposing an amendment to the NARAB provision during debate Thursday, Royce argued that one provision of the legislation "inappropriately empowers" the NAIC by directing the U.S. president to give preference to a list of NARAB members provided by the NAIC.  

Royce agreed to withdraw his amendment because the FSC's panel's Housing and Insurance Subcommittee agreed to take up the issue of the NAIC's role. Rep. Randy Neugebauer, R-Texas, chairman of the panel and sponsor of the NARAB amendment, agreed to do so at the markup. 

Royce argued in his comments Thursday, that, legally, the NAIC is a non-governmental, non-profit corporation; while its members are elected and appointed state regulatory officials. "As an organization, the NAIC does not have any regulatory authority," Royce said, "nor can it: Under current Federal law, no 'private group or association' may regulate in the field of interstate commerce."

Royce added that, "As we codify a role for the NAIC in federal law under this proposed amendment, I would hope to get assurances from you that your subcommittee can conduct a review of whether its status as a private corporation is commensurate with such a grant of authority."

Royce also asked the subcommittee to "also evaluate whether concerns about the independence, transparency, and governance of the NAIC make it a suitable partner for NARAB, as prescribed in this amendment."

NAIFA officials noted that a recent survey of its members revealed that they spend an average of 29 hours per year complying with insurance licensing requirements and an additional 28 hours on insurance-specific education courses. They spend on average more than $350 per year on insurance-specific continuing education courses, the survey found.

"The time and money spent on licensing adds up quickly for those who operate across state borders," NAIFA officials said. "But an agent's failure to hold licenses in multiple states can harm their business, as well as consumers." According to the survey, some 80 percent of NAIFA members say they have lost clients who moved to states in which they were not licensed.