The National Association of Registered Agents and Brokers Reform Act of 2013 (the bill) was introduced in both the U.S. House of Representatives and the U.S. Senate on March 12, 2013. The bill amends the Gramm-Leach-Bliley Act of 1999 (GLBA) and would establish the National Association of Registered Agents and Brokers (NARAB) to serve as a clearinghouse for producers who wish to do business in multiple states. Legislation mandating the creation of NARAB was previously passed by the U.S. House of Representatives in 2008 and 2010, however neither bill was passed in the U.S. Senate.
GLBA provided for NARAB in the event a majority of the states failed to implement reciprocal licensing for producers, however the licensing laws and procedures of a sufficient number of states were deemed to be reciprocal and NARAB was therefore never created. Although procedures have been streamlined in recent years, not all states are fully reciprocal, including some of the larger states, and a producer doing business in multiple states must still apply for individual state licenses and renew those licenses periodically. Membership in NARAB would eliminate the need for licenses in multiple states as well as the current barriers to full reciprocity.
NARAB will not be an agent or instrumentality of the U.S. Government. Instead, it will be a nonprofit corporation established in the District of Columbia and governed by a board of directors. The 13 directors will include eight insurance commissioners, two representatives of property and casualty producers, one representative of life or health producers, one representative of property and casualty insurers and one representative of life or health insurers. NARAB is to be established within two years of the passage of the bill and will apply to all lines of insurance, except title insurance and bail bonds.
- Any producer that is licensed in its home state is eligible to be a member of NARAB, including business entities.
- Membership will provide authorization to sell, solicit or negotiate in any non-resident state in which the member pays the requisite licensing fee.
- Authority is limited to the lines of business for which the producer is licensed in the home state and includes “all such incidental powers” as shall be necessary to carry out such activities in every U.S. jurisdiction.
- Incidental powers include claim adjustment and settlement to the extent permissible under the laws of the state as well as risk management, employee benefits advice, retirement planning or “any other insurance-related consulting activities.”
- Members will be required to pay licensing fees required by any state in which they do business.
- NARAB is to establish membership qualifications that are not “less protective to the public” than those contained in the National Association of Insurance Commissioners (NAIC) Producer Licensing Model Act.
- The fact that some states do not require criminal background checks has historically been an obstacle for full reciprocity. A producer will not be eligible to become a member of NARAB unless the producer has undergone a national criminal background check, either upon applying to NARAB or in the preceding two years.
- NARAB will notify the states and NAIC of new members, collect state licensing fees from members and remit those fees to the respective states. States will have 10 days to provide NARAB with evidence that the producer does not meet the criteria for membership.
- The bill contemplates that NARAB may use the NAIC as a central clearinghouse for the payment of fees to states.
- The bill preempts state laws that impose registration requirements on non-resident business entities that are NARAB members. This preemption would apply specifically to secretary of state registration requirements.
- The bill does not affect state laws requiring appointments. Although NARAB members will not need licenses in every state, it appears that the bill will not affect an insurer’s obligation to appoint NARAB member producers in each state in which the producer sells, solicits or negotiates business on behalf of the insurer.
- The bill specifically preserves state laws regulating market conduct, producer conduct, unfair trade practices and those establishing consumer protections. State insurance regulators will maintain their consumer protection and market conduct authority and will continue to handle consumer complaints involving producers. Complaints received by NARAB against its members will be referred to the respective state insurance departments.
- States will retain the ability to take disciplinary action against producers who are NARAB members. Disciplinary action by a state may trigger the suspension or revocation of NARAB membership. States may not, however, discriminate against producers that are members of NARAB. States will also continue to handle consumer complaints involving producers. Complaints received by NARAB against its members will be referred to the respective state insurance regulator.
On March 19, 2013, the Subcommittee on Securities, Insurance, and Investment of the Senate Committee on Banking, Housing, and Urban Affairs held a hearing on “Streamlining Regulation, Improving Consumer Protection and Increasing Competition in Insurance Markets.”
Testimony was presented by:
- Monica J. Lindeen, Commissioner of Securities and Insurance and State Auditor, Montana
- Jon A. Jensen, President, Correll Insurance Group
- Scott Trofholz, President and CEO, The Harry A. Koch Company
- Baird Webel, Specialist in Financial Economics, Congressional Research Service
The witnesses testified in support of the bill and provided an overview of state regulation of insurance producers licensing.
On March 8, 2013, the NAIC sent a letter to the chairpersons and ranking members of the U.S. Senate Banking Committee and the U.S. House of Representatives Financial Services Committee in support of the bill. The NAIC stated that the bill will preserve “[s]tate regulators’ authority and oversight over agents and brokers [and] provide critical protections [for] consumers of insurance products.”