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Fingerprint Model Wiped Out

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Insurance trade groups still are taking stock of a failure to get even a motion for a fingerprinting model regulation and are awaiting word from the National Association of Insurance Commissioners on what will happen next.

Iowa Commissioner Susan Voss, chair of the NAIC’s “D” Committee, said she plans to talk with commissioners at an annual commissioners’ gathering that runs Feb. 5-8 to determine what steps to take next.

In an interview with National Underwriter, Voss offered her reaction and thoughts on the future of the “Authorization for Criminal History Record Check Model Act.”

During a recent teleconference, after an hour of discussion on the model and how it would be moved to the Executive Committee, a precursor to full adoption, Voss called for a motion on the regulation and received no response.

“Quite frankly, I knew there was a lot of disagreement over the model,” Voss said, adding that when she became chair of the “D” committee in January 2005, the model already had been under development for some time.

Indeed, points of contention included whether officers and directors should be required to be fingerprinted rather than focusing the model on the fingerprinting of producers as well as where the prints should be housed. The NAIC had proposed creating a central depository, but some in the industry had argued that the responsibility should rest with the National Insurance Producer Registry, a joint industry-regulator body.

But Voss said she still was surprised that nothing was voted out of the group to the NAIC’s Executive Committee and potentially to Plenary for adoption.

It is still possible that a fingerprint model will be crafted and adopted by state insurance regulators but in an entirely new way, according to Voss.

“If we see anything, it is not going to look like what was voted on,” she added.

The model generated disagreement even at the commissioner level, Voss explained. “It went on for so long that everything was thrown in.”

Voss is optimistic that there could be a fingerprint model adopted by the NAIC this year, but it will require a “fresh start.”

She added, “I’d like direction on how much time to spend on this” because there are other issues such as producer licensing to which time could be devoted.

Longtime industry participants said they have never witnessed such a response, or rather, lack of one at the NAIC. Several said it suggests that even regulators are not comfortable with the model in its current incarnation.

After three committee meetings, the American Council of Life Insurers, Washington, is maintaining its position that it is satisfied with a point in the model that would exempt producers licensed with the National Association of Securities Dealers. ACLI also could support a model that included fingerprinting of officers and directors if data were housed with a joint regulatory-industry body, the National Insurance Producer Registry, rather than an NAIC central repository.

The ACLI, said Michael Lovendusky, associate general counsel with the ACLI, will wait to see what step regulators hope to take next but would be cautious of a proposal that did not have a central repository, but rather raised the possibility of officers and directors being required to be fingerprinted in individual states.

In a statement, the National Association of Insurance and Financial Advisors, Falls Church, Va., expressed disappointment in the lack of a motion, saying, “Our organization as well as other industry trade groups and the NAIC have invested nearly three years of time and effort to draft a model that promotes uniformity and coordination among states, and streamlines the producer licensing process.

“NAIFA hopes the NAIC, under Iowa Commissioner Susan Voss’ leadership, can revive the effort to adopt a model law for criminal background checks and that it won’t miss an opportunity to bring insurance regulation into the 21st century.”

The lack of a motion “was not surprising really, given that there was no consensus, and, it appears, no consensus on the regulatory side, as well,” said Wes Bissett, senior vice president with the Independent Insurance Agents and Brokers of America, Alexandria, Va. “If nothing more happens, we will be pleased because we are opposed to the draft,” he added.

“In most legislative arenas, this proposal would be dead. It is hard to believe that it would be pursued,” he said. The draft ended up going far beyond the scope of a December 2002 draft that simply set up requirements if states needed to get access to FBI data, Bissett explained.

Scott Cipinko, of counsel with Lord, Bissell & Brook for the Life Insurers Council, Atlanta, said the model would raise costs for small insurers with uncertain benefit.

John Fielding, a representative for the Council of Insurance Agents and Brokers, Washington, said the council supports the model and efforts to make reciprocity more complete.

He expressed surprise that after 14 drafts, the model was not advanced. It is a bit “embarrassing,” he said that after several years of work, no motion was made.


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