REGULATORS PROGRESS ON PRODUCER MATTERS

State insurance regulators are making rapid progress on several producer database and licensing initiatives designed to eliminate barriers to non-resident producer licensing and to increase uniformity across state lines.

Key to the effort of the National Assn. of Insurance Commissioners is a resolution approved earlier this year that endorses the concept of uniform treatment for the licensing of all producers as being "in the best interest" of state regulation.

However, a driving force behind their streamlining efforts is the possibility of federal pre-emption of regulatory authority over producer licensing.

The U.S. Senate's Banking, Housing and Urban Affairs Committee is now planning to mark up next month a financial modernization bill that, among other things, would create a National Assn. of Registered Agents & Brokers, a national clearinghouse for insurance broker licensing (BI, July 7, 1997).

Under the version of the legislation approved by the House, NARAB would be controlled by state regulators but could pre-empt individual state regulations that didn't conform with its uniform licensing rules, according to Joel Wood, senior vp-government affairs for the Washington-based Council of Insurance Agents & Brokers, which supports the legislation.

However, state regulators are hoping that the progress they have made on recent state initiatives may diminish H.R. 10 supporters' desire for federal action.

Regulators "are literally reinventing the way the insurers and the producer community can interface with the many state insurance regulators around the country," said Glenn Pomeroy, North Dakota Insurance Commissioner and president of the NAIC. "We can make that work a lot better through these initiatives," which are included in a program known as "State Regulation 2000," he said (BI, Feb. 9).

The Producer Database is a cornerstone project of the NAIC effort. It will allow states and insurers to share information, including biographical and enforcement data, about producers, so they can make better decisions about who should be able to sell insurance in the United States.

Currently, insurance departments in 14 states -- representing 70% of U.S. producers -- regularly send information to the database. Five additional states -- Arizona, California, Connecticut, Illinois and New Jersey -- are expected to join them soon.

New York's recent decision to participate received an enthusiastic response from Mr. Pomeroy and producers' representatives.

That was a "huge step because of the size of the state and the producer population," Mr. Pomeroy said.

"New York's participation is extremely important, if not critical," said Dave Turner, vp-state government affairs for the Independent Insurance Agents of America in Alexandria, Va. "It's a huge state with a large number of producers and is considered a leader in state regulation," he explained.

Mr. Pomeroy also said NAIC regulators have made "tremendous" progress in adopting the organization's Uniform Treatment Project, which seeks to reduce discriminatory practices and barriers in the appointment of non-resident producers and encourages state regulators to accept a uniform licensing application form.

Examples of discriminatory practices some states impose on non-resident producers include banning the sale of insurance by non-resident producers or requiring that a non-resident producer have an office or other physical presence in a state. Practices also include bonding or continuing education requirements different from those imposed on resident producers.

In addition, the IIAA's Mr. Turner said three or four states also have "fairly entrenched" countersignature laws, which require that coverage arranged by a non-resident producer also be signed by a resident producer -- who typically requires payment for this service. However, he declined to identify those states, saying ongoing talks aimed at eliminating that requirement are politically sensitive.

Currently, about 20 states have signed a declaration indicating their readiness to use the uniform process, and many more states are analyzing what changes they need to make so they can do so in the future, Mr. Pomeroy said.

In addition, the 13 states that form the NAIC's Midwestern Zone established a reciprocity program on July 1 to jointly approve continuing education courses taken in other states. They have invited states outside the Midwest to join them.

The NAIC also is making progress in establishing its Producer Information Network, which will allow regulators and insurers to exchange producer-related information about appointments, terminations and license applications. A pilot project to test the PIN network, involving Iowa and Missouri and five insurers, will be completed by August, after which all states and insurers will be invited to participate.

For state insurance regulators, the main barrier to streamlining producer regulation is getting the issue up high enough on commissioners' radar screens so that they commit to it and begin working to implement it, Mr. Pomeroy said. That may include asking their respective state legislatures for statutory changes, he added.

While state insurance regulators have made significant progress recently in improving uniformity, supporters of the pending NARAB proposal plan to continue pushing for it, the CIAB's Mr. Wood said. "We still think there needs to be a political incentive for states to act, and the NARAB proposal provides that.'