NARAB II on the Road to the Interstate License Dream
January 8, 2015 by Arthur D. Postal, arthur.postal@innfeedback.com
WASHINGTON – Creation of the National Association of Registered Agents and Brokers (NARAB) would represent a long-standing goal of both life and property/casualty insurance agent trade groups.
According to the National Association of Insurance and Financial Advisors, enactment of NARAB-II would create an organization whose specific jurisdiction would be the oversight of insurance producer reciprocal non-resident licensing and continuing education standards on a national – not federal – level.
“NARAB II would benefit consumers through increased competition among agents and brokers and greater consumer choice, as well as continuity of client services,” NAIFA said in a recent policy statement. “The legislation also would provide higher and more consistent national consumer protections for those agents utilizing NARAB.”
“Basically – it’s a clearinghouse,” said Joel Wood, senior vice president for governmental affairs at the Council of Insurance Agents and Brokers.
“It’s an administrative mechanism to facilitate multi-state licensure, and it will work closely with the National Insurance Product Registry (NIPR),” he said.
Under NARAB-II, any producer (individual or agency) licensed in their home state could choose to apply to NARAB and submit to a federal criminal background check, NAIFA officials said.
Accepted NARAB members would pay a membership fee as well as all requisite state licensing fees for each state in which they choose to do business. Under the bill on the Senate floor today, members of NARAB would be held to a single non-resident licensing and continuing education standard for each line of authority.
The NARAB standards would be determined by a 13-member board made up of eight insurance commissioners and five individuals with relevant expertise and experience in producer licensing, NAIFA said.
“The idea for NARAB is now 14 years old. We’ve been working on it literally for that long, and I’m hoping that in this legislation today we can get it across the finish line,” Sen. Mike Crapo, R-Idaho, said on the Senate floor in June, when the TRIA bill containing the NARAB-II provision was considered. Crapo, then-ranking minority member of the Senate Banking Committee, said that under the NARAB provisions, insurance commissioners of the states “will be able to better catch bad actors who after losing a license in one state move quickly to enter into another state.”
Crapo also said that state regulators will serve on the board of NARAB “with the same objectives they have as an insurance commissioner — to protect the public interest by promoting the fair and equitable treatment of insurance consumers.”
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He added that the creation of NARAB will allow agents and brokers to focus on their responsibilities to their clients and spend less time dealing with red tape.
By reducing costs and increasing competition among insurance producers, we will generate lower costs and better service for consumers,” he said.
Importantly, Crapo said, NARAB deals specifically with marketplace entry and “would not impact a state’s jurisdiction over day-to-day authority in the insurance marketplace.
“This is a very critical point, because I think probably the biggest issue relating to this legislation is preserving and protecting state’s rights and state jurisdiction with regard to regulation of the insurance marketplace,” he added.
Wood cautioned that “it could take a couple of years to get up and running.”
He said that under a compromise with the National Association of Insurance Commissioner, the governance will come from a board that is appointed by the President, “with recommendations from the NAIC, so it will be state-commissioner dominated, with industry/stakeholder presence as well,” Wood said.
Once constituted, Wood said the organization will establish the membership criteria for agent/broker (and agency/brokerage) non-resident licensure.
“One will become a ‘member’ of NARAB on a purely optional basis, and pay all of the administrative costs associated with the organization (as well as all state licensing fees,” he said.
“You first have to be licensed in your own state, and then you apply for membership in NARAB,” Wood said.“Who knows how that membership criteria will evolve?” Wood said, but he envisions a scenario where, having a CPCU designation, for example, would allow an agent to be waived in.
“It’s just like any state coming up with licensing criteria right now – they’ll develop it,” Wood said.“Only when you’re a NARAB member, you don’t have to go state to state for the nonresident licenses.”