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WHITE SULPHUR SPRINGS, W.Va.-The Council of Insurance Agents & Brokers continues to push for a national agent/broker licensing clearinghouse, even as the fate of the legislation containing the proposal hangs in the air.
The current state-by-state licensing system is unduly burdensome to agents seeking to do business in multiple states, and their costs of complying with a maze of differing requirements is directly passed on to customers, the Council contends.
If the financial services reform legislation now stalled in the House fails to see a vote this year, the Council and its allies may press for a standalone measure that would set the stage for a licensing clearinghouse.
In addition to the cost issue, agents and brokers are pushing for the measure for two other reasons, said Joel Wood, vp of government affairs for the Council:
The Comptroller of the Currency is likely to protect banks entering the insurance arena from having to comply with state countersignature laws and other burdensome licensing requirements.
The U.S. Trade Representative has indicated in talks with the World Trade Organization that foreign insurers and brokers seeking to enter the U.S. market would also be exempt from state-by-state licensing, as is the case in the European Union.
"They are right that this is a trade barrier," he said of the current state licensing system. "But it's no less a hassle for domestic brokers," Mr. Wood added.
The financial services bill, H.R. 10, contains a provision calling for creation of a clearinghouse to be run by a newly created National Assn. of Registered Agents & Brokers (BI, July 7). Membership in NARAB would be open to all state-licensed agents and brokers that meet the new voluntary organization's membership criteria. That criteria, such as continuing education, would be based on the highest standards currently in the market. NARAB would be overseen by a board of directors, the majority of which would be state insurance regulators.
NARAB would not issue a federal license but would streamline the multistate licensing process by devising uniform licensing requirements. It would therefore allow agents and brokers to obtain licenses from each of the states in which they wish to do business from one source and in an informed manner.
States would continue to collect licensing fees, but NARAB members would be exempt from state residency requirements, countersignature laws and duplicative continuing education requirements.
The House Banking Committee approved NARAB as part of H.R. 10. It was included in the House Commerce Committee's version of the bill, but the legislation has stalled in the House.
The insurance industry is broadly aligned in support of the measure. In addition to the Council, supporters include the Risk & Insurance Management Society Inc., the American Insurance Assn., the Reinsurance Assn. of America and the Independent Insurance Agents of America Inc., according to Mr. Wood. The Alliance of American Insurers and the National Assn. of Mutual Insurance Companies do not oppose the measure, he added.
The only two organizations actively opposed to NARAB are the National Assn. of Insurance Commissioners and the National Assn. of Independent Insurers, though both concede the current maze of state licensing requirements needs to be simplified.
The NAII supports streamlining producer licensing but opposes any perceived erosion of state regulation. Any pre-emption of state regulatory authority would set a dangerous precedent and could invite greater federal oversight of insurance, the NAII said earlier this year. It has said the state regulatory system can deal with this issue.
For its part, the NAIC argues that NARAB is not needed because the state regulators group is working to improve the efficiency of broker licensing, such as through its Producer Information Network. While the Council welcomes regulators' efforts, they will not have the same effect as NARAB at reducing the filing burdens from varying state fees, licensing standards and residency requirements, the Council contends.
"The NAIC is making some progress in the area of state licenses, but their agenda will not reduce the multiplicity of licenses that must be obtained, nor will it remove protectionist state residency requirements," said Albert R. Counselman, president and chief executive officer of Riggs, Counselman, Michaels & Downes Inc. of Baltimore and outgoing chairman of the Council.
"The NAIC is now considering ways to make the licensing system more uniform and hopes to gain enough agreement among the states to head off NARAB. We applaud the NAIC's actions and will continue to work cooperatively with regulators to develop a workable licensing system for agents and brokers operating in multiple states," Mr. Counselman said.
Mr. Wood noted that under the stalled legislation, state regulators can put their own house in order and eliminate the need for NARAB.
If states representing at least 50% of U.S. commercial insurance premiums essentially adopted uniform licensing requirements within five years, NARAB could be shelved, he explained. Or, under the legislation, the NAIC itself could implement and operate NARAB if enough states don't act within three years. Only if enough states failed to act within five years would NARAB be created as an independent entity.
"We'll be prepared to fight for NARAB as a free-standing measure, if necessary," Mr. Counselman said.