Connecticut Insurance Commissioner Thomas Sullivan recently endorsed proposed federal legislation to streamline the insurance producer licensing process and establish uniformity in the qualifications that need to be met in order to conduct business in multiple states. According to Sullivan, producer regulation is an area where there is a need for federal legislation.

The National Association of Registered Agents and Brokers

The proposed federal legislation, H.R. 5611, previously discussed here, here, and here, amends the Gramm-Leach-Bliley Act to reestablish the National Association of Registered Agents and Brokers (“NARAB”) as a nonprofit membership corporation. NARAB’s purpose will be to create uniform standards for producer licensing, continuing education, and other insurance producer qualification requirements and conditions, including criminal background checks.

NARAB will have a nine-member board of directors comprised of insurance industry state regulators and trade groups. Four board members will be selected by the National Association of Insurance Commissioners, while the remaining five will be selected by various insurance industry trade groups. NARAB would not be an agent or instrumentality of the federal government, but may be dissolved by an Act of Congress.

How to Become a Member of NARAB

Membership in NARAB would be open to insurance producers. H.R. 5611 defines an insurance producer as “any insurance agent or broker, excess or surplus lines broker or agent, insurance consultant, limited insurance representative, and any other individual or entity that solicits, negotiates, effects, procures, delivers, renews, continues or binds policies of insurance or offers advice, counsel, opinions or services related to insurance.”

To become a member of NARAB an insurance producer must first be licensed in its home state. After becoming licensed in the home state, the insurance producer must apply for membership in NARAB and submit to a national criminal background record check. The applicant must also meet additional criteria for membership that NARAB will establish, including standards for personal qualifications, education, training, and experience.

Membership has its Privileges

Membership in NARAB will authorize an insurance producer to sell, solicit, negotiate, effect, procure, deliver, renew, continue, or bind insurance in any state for all lines of insurance authorized under the insurance producer’s home state license, and exercise all such incidental powers, as shall be necessary to carry out such activities, including claims adjusting and settlement, risk management, employee benefits advice, retirement planning, and any other insurance-related consulting activities. Membership would be renewed on a biennial basis and H.R. 5611 authorizes NARAB to establish and collect membership fees to cover the costs of its operations.

Although members will be required to pay state licensure fees, no state, other than a NARAB member’s home state, may impose any other licensing or qualifications to do business requirements. Also, no state, other than a member’s home state, may deny a license to a member of NARAB which has paid the requisite state licensing fee.

NARAB’s Powers, Duties and Responsibilities

H.R. 5611 allows for NARAB to establish separate classes of membership, with different criteria, if NARAB reasonably determines that performance of different duties requires different levels of education, training, experience, or other qualifications. The current proposed legislation also allows NARAB to establish separate categories within each class, based on the types of licensing categories that exist under state laws.

NARAB is authorized to establish, as a condition of membership, continuing education requirements which would be comparable to the continuing education requirements under the licensing laws of a majority of the states. These requirements must satisfy any equivalent requirement of an insurance producer’s home state, and likewise, any equivalent requirements satisfied during the applicable licensing period of the insurance producer’s home state must satisfy the NARAB continuing education requirements. States other than the home state of an insurance producer are preempted from requiring the satisfaction of any continuing education requirements for any such insurance producer.

The proposed legislation will also require that NARAB establish an Office of Consumer Complaints that will receive, maintain records of, and, when appropriate, investigate complaints from both consumers and state insurance regulators related to members of NARAB.

H.R. 5611 makes clear that it does not alter or affect the continuing effectiveness of any law, regulation, provision, or other action of any state which purports to regulate market conduct or unfair trade practices or establish consumer protections to the extent that such law, regulation, provision, or other action is not inconsistent with H.R. 5611. 

Coordination with Other Regulators

H.R. 5611 allows for NARAB to (i) issue uniform insurance producer applications and renewal applications that may be used to apply for the issuance or removal of state licenses, (ii) establish or utilize a central clearinghouse through which members of NARAB may apply for the issuance or renewal of licenses in multiple states, and (iii) establish or utilize a national database for the collection of regulatory information concerning the activities of insurance producers.

In addition, NARAB is authorized to coordinate its efforts with the Financial Industry Regulatory Authority in order to ease any administrative burdens that may fall on persons that are members of both associations.

The Powers of the States under H.R. 5611

Under H.R. 5611, no state may (i) impede the activities of, take any action against, or apply any provision of law or regulation to any insurance producer because that insurance producer has applied to become, or is a member of NARAB, (ii) impose any requirement upon a member of NARAB that it pay different fees to be licensed or otherwise qualified to do business in that state based on its residency, (iii) impose any continuing education requirements on non-resident insurance producers, or (iv) impose any licensing, registration, or appointment requirements upon or impede the activities of any non-resident insurance producer that sells, solicits, negotiates, effects, procures, delivers, renews, continues, or binds insurance for commercial property and casualty risks to an insured with risks located in more than one state, provided that such non-resident insurance producer is otherwise licensed as an insurance producer in the state where the insured maintains its principal place of business and the contract of insurance insures risks located in that state.

In addition, no state, other than a member’s home state, may (i) impose any licensing, appointment, integrity, personal or corporate qualifications, education, training, experience, residency, continuing education or bonding requirement upon a member of NARAB that is different from the criteria for membership in NARAB or renewal of such membership, (ii) implement the procedures of a system of licensing or renewing the licenses of insurance producers in a manner different from that of NARAB, (iii) impose any requirement upon a member of NARAB that it be licensed, registered or otherwise qualified to do business or remain in good standing in such state, including any requirement that such insurance producer register as a foreign company with the secretary of state or equivalent state official, or (iv) require that a member of NARAB submit to a criminal history record check as a condition of doing business in such state.

To see the full text of H.R. 5611, click here.