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To the editor: Your July 7 article, "Brokers Applaud License Clearinghouse Bill," did not go far enough in telling "the other side of the story."

While the intended objectives of the proposed National Assn. of Registered Agents & Brokers as proposed in H.R. 10 are worthy-to streamline the agent licensing process and exempt agents from countersignature laws and residency requirements-the method by which this objective is sought to be achieved gravely endangers state regulation of insurance.

Several points need to be emphasized in this regard.

First, the proposal does not spell out any of the specific standards that would be implemented under NARAB. Who would set these standards? The federal government would.

NARAB would be overseen by the "National Council of Financial Services," a new 10-member governing board that would be dominated by federal regulators. Under the bill, the NCFS would be required to approve all NARAB regulations. Alas, the federally dominated NCFS would be forcing the states to comply with federal standards.

Second, states would be forced to accept agents without a first right of refusal. It is true that an agent licensed under NARAB would remain subject to state regulation and discipline in any state in which he or she practices after becoming licensed in a particular state and beginning to conduct insurance sales activities. However, the states would not be permitted to pass on the qualifications of any agent seeking licensure through NARAB prior to the issuance of a state license. For example, an agent holding a Michigan license who meets the NARAB licensing criteria must be accepted as an agent in any other state in which he or she chooses to operate. Does this preserve state regulation of agent licensing? Of course not. What value remains in permitting the states to discipline an agent if they are not permitted to pass on the agent's qualifications before a license is issued?

Third, any state law in conflict with NARAB would be pre-empted. When disputes arise as to whether a state law is pre-empted, and they most surely will, the federally dominated NCFS would determine whether a state license law is pre-empted.

Fourth, agents would be subject to dual regulation of their activities. All agents in a state, whether they are licensed by the state or through NARAB, would be subject to state regulation of their activities. In addition, those licensed under NARAB would be subject to an additional layer of regulation by the "Office of Consumer Complaints," an agency that would be created to receive and investigate complaints from consumers and state insurance regulators related to NARAB members.

The agency would have a toll-free number and be authorized to take any disciplinary actions it deems appropriate as a result of its investigation of complaints. This also would lead to consumer confusion-"Who do I call to complain, the state insurance department or NARAB?"

Fifth, NARAB could be sued only in federal court. As such, the courts with the most significant interest in upholding state law-the state courts-could not hear challenges to NARAB's authority over the states.

Finally, the most looming question is this: What activities and responsibilities would be given to NARAB in the coming years? Could it become a new super-federal insurance regulatory agency? Could it be the beginning of the end of state regulation of insurance? The answer to both of these questions is a worrisome "yes."

As an alternative to the NARAB proposal, we would support federal legislation with these components:

Give the states five years to implement uniform agent licensing requirements. Three years is too short, as many state legislatures only meet every two years, and it may take two or more attempts to get legislation of this type passed in a particular state.

Instead of imposing a federal bureaucracy upon the states if a majority of them fail to enact uniform agent licensing laws, simply prohibit the enforcement of the countersignature laws and discriminatory agent residency laws of any state that fails to enact uniform licensing requirements within five years of the bill's passage.

A steady and sound insurance regulatory system has been in place for decades. State regulation of insurance, the mechanism that has regulated the business of insurance since adoption of the McCarran-Ferguson Act in 1945, is getting the job done effectively and efficiently. To preserve this system and protect the insurance industry from dual regulation, the NARAB proposal must be defeated.

Scott A. Gilliam

Assistant Secretary/

Director of Government Relations

The Cincinnati Insurance Cos.