Congress has put in place a mechanism to streamline nonresident licensing for insurance producers. The National Association of Registered Agents and Brokers Reform Act of 2015 was included in the federal legislation reauthorizing TRIA, the ‘‘Terrorism Risk Insurance Program Reauthorization Act of 2015” (H.R. 26) (TRIPRA), which President Obama signed into law on January 12, 2015. TRIPRA creates the National Association of Registered Agents and Brokers (NARAB). By becoming a member of NARAB, an insurance producer licensed in the producer’s home state1 will be authorized to act as a nonresident producer in any other state upon paying the required licensing fee.
Currently, after being licensed in their state of residence or home state, insurance producers seeking to solicit insurance in other states must obtain separate nonresident insurance producer licenses in each state. While the licensing requirements in each state are similar, state-specific requirements must often be satisfied. Also, while the licensing process has been made somewhat easier over the years (e.g., with the use of the National Insurance Producer Registry to submit applications), nonresident licensing remains an administratively burdensome task. NARAB is intended to address this issue.
NARAB, as implemented by TRIPRA, amends an older federal law that was part of the Gramm-Leach Bliley Act (GLBA) but never came into effect.2 In 1999, GLBA created a version of NARAB, but GLBA provided that the NARAB provisions would not take effect if, by November 2002, National Association of Insurance Commissioners (the NAIC) determined that the majority of the states had either (1) enacted uniform laws governing the licensing of insurance producers or (2) enacted reciprocity laws governing the licensure of nonresident insurance producers. As a result of many states enacting a Producer Licensing Model Act (adopted by the NAIC in 2000), the NAIC determined that a majority of states had satisfied GLBA’s reciprocity requirements prior to the November 2002 deadline, and the GLBA’s version of NARAB was never created. For this reason, NARAB as now established by TRIPRA has been referred to by the industry as “NARAB II.”
Effect of NARAB Membership
An insurance producer’s membership in NARAB shall “be the equivalent of a nonresident insurance producer license” in every state where the NARAB member pays the state’s licensing fee3 and shall:
authorize an insurance producer to sell, solicit, or negotiate insurance in any State for which the member pays the licensing fee set by the State for any line or lines of insurance specified in the home State license of the insurance producer, and exercise all such incidental powers as shall be necessary to carry out such activities, including claims adjustments and settlement to the extent permissible under the laws of the State, risk management, employee benefits advice, retirement planning, and any other insurance-related consulting activities.4
However, a member shall also be considered a nonresident insurance producer for purposes of state laws concerning revocation or suspension of such a license. TRIPRA is clear that a member acting as a nonresident producer is also subject to all state laws that: “(i) regulate market conduct, insurance producer conduct, or unfair trade practices; (ii) establish consumer protections; or (iii) require insurance producers to be appointed by a licensed or authorized insurer.” Also, TRIPRA requires NARAB to maintain a toll-free telephone number for consumer complaints and to refer any complaint involving alleged misconduct or a violation of state law to the state insurance regulator where the consumer resides.5
Eligibility for NARAB Membership
TRIPRA provides that NARAB may have different categories of members, with separate membership criteria, if NARAB reasonably determines that performance of different duties requires different education or other qualifications. NARAB must have a class of membership for business entities. A business entity member must designate an individual NARAB member to be responsible for the entity’s NARAB compliance and compliance with state insurance laws.6
An insurance producer licensed in its home state is eligible for membership in NARAB, provided the producer’s license is not currently suspended or revoked by any state. Also, in order for an individual insurance producer to be eligible for membership, he or she must undergo a criminal history record check under regulations to be prescribed by the Attorney General of the United States (an individual who has undergone such a record check in the prior two years in his or her home state shall be deemed to have satisfied this requirement). TRIPRA contemplates that an individual producer may be denied NARAB membership under “reasonably consistently applied standards” related to criminal history.7
TRIPRA allows NARAB to establish membership criteria, “which shall include standards for personal qualifications, education, training, and experience.” Any such qualifications shall not be less protective to the public than the qualifications contained in the NAIC’s Producer Licensing Model Act in effect as of the date of the enactment of TRIPRA. Such qualifications also “shall consider the highest levels of insurance producer qualifications established under the licensing laws of the States.”8
Membership must be conditioned on satisfaction of continuing education requirements, “which shall be comparable to the continuing education requirements under the licensing laws of a majority of the States.” NARAB must provide reciprocity to members that have satisfied equivalent continuing education requirements in the member’s home state. Also, a member may not be required to satisfy continuing education requirements under the laws of any state but the member’s home state.9
When an insurance producer has satisfied NARAB’s membership criteria, NARAB must notify all states and the NAIC. The states then have 10 business days to provide NARAB with any evidence that the producer does not satisfy the criteria for NARAB membership. Also, on an ongoing basis, NARAB must provide the states and the NAIC with a list of the states in which each member is authorized to operate.10
Preemption of State Law
TRIPRA expressly preempts certain state laws. For example, TRIPRA provides that no State, other than the home State of a member of NARAB, shall “impose any requirement upon a member of the Association that it be licensed, registered, or otherwise qualified to do business or remain in good standing in the State, including any requirement that the insurance producer register as a foreign company with the secretary of state or equivalent State official.” Further, TRIPRA provides that no state shall (A) apply any law arbitrarily or discriminatorily to any insurance producer because that producer is a member of NARAB, (B) require a member of NARAB to pay fees different from those required to be paid by non-members, or (C) as indicated above, impose any continuing education requirements on any nonresident insurance producer that is a member of NARAB.11
However, TRIPRA may not be construed “to prohibit a State from investigating and taking appropriate disciplinary action, including suspension or revocation of authority of an insurance producer to do business in a State, in accordance with State law and that is not inconsistent with the provisions of this section, against a member of the Association as a result of a complaint or for any alleged activity … .”12
GLBA resulted in positive changes to the insurance producer licensing laws in terms of the uniformity and reciprocity of non-resident licensing. However, obtaining nonresident producer licenses still remains an administratively burdensome task subject to state specific requirements. By allowing an insurance producer licensed in its home state to become a member of a single association and then obtain nonresident producer authority in any other state simply by paying the applicable state fees, NARAB should provide producers with welcome efficiencies.