HIGHLIGHTS:

  • On Jan. 12, President Obama signed legislation establishing the National Association of Registered Agents and Brokers (NARAB), to which any licensed insurance producer meeting certain requirements can belong.
  • In 2017, any NARAB member licensed in her or his home state will be able to obtain a non-resident insurance producer license in any other state.

In yet one more assertion of federal power to regulate insurance – which states have long controlled – President Obama signed legislation on Jan. 12 that will dramatically speed the licensing of insurance agents and brokers in states where they do business but do not reside. In the same bill that extended the federal government's program for reimbursing insurance companies for a portion of their losses caused by terrorist acts, Congress created the National Association of Registered Agents and Brokers (NARAB) as a nonprofit independent corporation. NARAB will act as a central clearinghouse allowing an insurance producer licensed in good standing in her or his home state to become licensed in every other state in which the producer intends to do business, as long as: 1) the producer has no criminal record according to the FBI criminal history search, 2) the producer pays the applicable licensing fees and 3) the agent or broker meets other qualifications established by NARAB for training, experience and education.

Once NARAB accepts the membership application from a qualified producer, that producer may "sell, solicit or negotiate insurance for which the member pays the licensing fee" and may undertake such incidental activities as claims settlements, risk management and advising on employee benefits and retirement planning. Congress did specify, however, that the legislation does not affect the application of state market conduct and unfair trade practice laws. Nor does the legislation preempt state laws requiring insurance companies to formally appoint producers as their agents.

The new law also requires NARAB to establish continuing education (CE) requirements as a condition of membership that are comparable to the CE requirements of a majority of states. However, any producer that has satisfied the CE mandates of his or her home state shall not be required to satisfy any CE requirements of any other state or to satisfy NARAB's requirements if they are equivalent to the ones in the producer's home state.

The new rules become effective once NARAB is incorporated and two years after Jan. 12, 2015. NARAB's board of directors shall consist of 13 presidential appointees confirmed by the Senate. Eight of those directors must be state insurance commissioners (or former commissioners in the 

very unlikely event that eight current commissioners do not accept appointments). The chairman of the NARAB board must be a current state insurance commissioner. Three of the private NARAB directors must have demonstrated expertise in property/casualty insurance and two directors must have that credential for life or health insurance. No more than four of the commissioner members may belong to the same political party, and all directors will be subject to various ethics and conflict-of-interest rules.

NARAB membership will likely eliminate the confusing and cumbersome patchwork of state producer licensing rules. With this law, Congress and the Obama administration will have given a very useful push for states to better coordinate and streamline insurance regulation.