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Friday, July 25, 2008 |  |
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Producer Licensing
At Issue
State insurance departments oversee the licensing of producers engaged in the negotiation, sale and/or solicitation of insurance products within their respective states. A producer must have a resident license in his or her home state, and a non-resident license in all other states he or she does business. States monitor and regulate the market activities of its agent population and are best positioned to take regulatory action against the producer for acts harmful to its consumers such as misrepresenting the terms of an insurance contract. In 2006, states levied fines of $19,824,776 against producers and recovered $61,562,994 in restitution for consumers. Reciprocity addresses non-resident licensing, while uniformity addresses resident licensing. The Gramm-Leach-Bliley Act of 1999Section 321 of the 1999 Gramm-Leach-Bliley Act (GLBA) required at least 29 states to meet either its uniformity or reciprocity requirements by November 12, 2002, in order to avoid preemption and the formation of a national body for licensing of insurance agents, the National Association of Registered Agents and Brokers (NARAB).
State Insurance Commissioners are elected to pursue the reciprocity option which requires states to enact reciprocal laws and regulations governing the licensure of nonresident individuals and entities, and largely defer to the home state's requirements. Under the GLBA, the National Association of Insurance Commissioners certified whether states achieved reciprocity based on a four-pronged standard developed by the NAIC's NARAB Working Group. The Producer Licensing Model Act (PLMA) was adopted and consequently enacted in 39 states. In August 2002, the NARAB Working Group issued its report and certified 35 states with the GLBA reciprocity certification. Currently, 43 states are reciprocal under this reciprocity standard. Uniform Resident Licensing Standards
In 2002, the NAIC adopted 37 Uniform Resident Licensing Standards. The NAIC and its affiliate, the National Insurance Producer Registry (NIPR), have transformed the producer licensing process through automation and standardization by creating a virtual one-stop shop for producers and companies to conduct licensing transactions across multiple jurisdictions using one uniform license application and a centralized repository of insurance producer information. NAHU has a rotating seat on NIPR's Board of Directors.
NAHU's Action
NAHU is a member of the NAIC/Industry Producer Licensing Coalition, a group that promotes the NAIC's priority of continued producer licensing reform by advocating for the elimination of the Secretary of State verification requirement and completing a membership-wide, comprehensive producer licensing assessment in three months. The NAIC has issued an Aggregate Report that includes findings and recommendations for next steps. Regulator-led review teams conducted on-site visits to 50 states, D.C., and Puerto Rico to review certain components of each state's producer licensing laws, practices, and processes. The assessment verified that the states previously certified as reciprocal remain so today, along with additional states eligible for reciprocity certification. Of the 37 Uniform Resident Licensing Standards, the producer licensing assessment found high compliance among the states with respect to 26 of these standards and low compliance (less than 35 states) with the remaining standards. The Aggregate Report provided details on the reasons for not achieving full resident licensing uniformity including active opposition or indifference from local industry regarding standards such as fingerprinting; legislative hurdles; and disparate interpretations of the standards. The NAIC has established a Commissioner-level NARAB Working Group to proactively address many of the issues raised in the Aggregate Report and has charged its Producer Licensing Working Group with providing further guidance and recommendations on the Uniform Resident Licensing Standards.
Legislative Action
Optional Federal Charter NARAB II For questions on this issue, please contact the Government Relations Department.
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