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Regulation and Compliance > State Regulation

NAIC Reports On Producer Licensing Consistency

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A 3-month review of how states are complying with uniform producer licensing standards shows that 26 of 37 standards are in high compliance among states, according to the National Association of Insurance Commissioners, Kansas City, Mo.

“This self-assessment outlines where we stand today in terms of compliance with the Gramm-Leach-Bliley Act’s reciprocity requirements and uniform resident licensing standards,” says NAIC president-elect and New Hampshire Insurance Commissioner Roger Sevigny. “It also provides an independent legal review and on-site peer assessment of our licensing laws, regulations, practices and processes,” says Sevigny, who is also chair of the NAIC/Industry Producer Licensing Coalition.

The NAIC sent a team of volunteer regulators to visit 52 jurisdictions to examine compliance with its 2002 reciprocity standards.

The standards were developed so that states would comply with the Gramm-Leach Bliley Act of 1999. The GLBA required states to establish reciprocity as a way to avoid establishment of a federal body, the National Association of Registered Agents & Brokers.

The NAIC team defined high compliance as fulfillment of the standard by 35 or more states.

In addition, the team developed a snapshot of how states are using electronic tools provided through the NAIC and its affiliate, the National Insurance Producer Registry, to improve the licensing process for producers. Among the figures developed by the team were the following:

o 46 states electronically process non-resident licenses;

o 32 electronically process non-resident renewals;

o 12 electronically process resident licenses;

o 8 electronically process resident license renewals;

o 41 electronically process appointments and terminations;

o 6 electronically process appointment renewals;

o 47 use national producer numbers;

o 50 have eliminated paper certifications; and

o 45 accept address change requests electronically.

Another success indicator is that 47 states have moved away from the use and disclosure of Social Security numbers and, through NIPR, have implemented the use of a national producer number. The move was part of an effort to address privacy concerns and to move away from state-specific licensing numbers, according to the NAIC report, dated Feb. 19.

And 45 states have implemented the recommended electronic, centralized system through which a producer may notify all appropriate states of a change of address, according to the report.

Moreover, 41 states are using NAIC/NIPR to electronically process appointments and terminations, with 6 states electronically processing appointment renewals, and more to follow soon. Only 2 other states require appointment and termination transactions but do not use NIPR, the report says.

Consumer protection has been enhanced by a state tracking system, according to the NAIC report. Such safeguards are a key reason state officials point to for retaining state regulation, rather than relying on a federal system of insurance regulation,

As evidence, the report cites the NAIC’s 2006 Insurance Department Resources Report, which cited the following actions taken by states against producers:

o 1,694 license suspensions;

o 1,509 license revocations;

o 473 cease-and-desist orders; and

o 1,108 license denials.

In addition, states levied fines of $19,824,776 against producers and recovered $61,562,994 in restitution for consumers, the report continues.

The NAIC team argued that even among non-compliant states, there was a willingness to move toward conformity. For instance, of 4 states identified as not checking work authorizations for resident applicants who were not U.S. citizens, all indicated that they would “immediately change their processes,” the team reported.

The team did find low compliance for 12 of the standards, with fewer than 35 states falling in line. According to the NAIC report, however, compliance with those standards was more complicated than simply changing administrative procedures.

Reasons for failure to conform to standards ranged from legislative hurdles, differing interpretations of what is meant by uniform licensing, and a lack of concern among local industry representatives about non-compliance.

As an example, some states exempt producers from continuing-education requirements if they are over age 65 or have been licensed for 30 years or more, notes to the report.

In another example, 39 states were found to be out of compliance with fingerprint standards.

Twelve states said that there would be opposition to any fingerprinting requirements from their local industry, trade and producer groups, while 3 states noted opposition from state legislatures. Ten states said that they could not comply with the standard until there was a central depository of fingerprints, while 6 states expressed concern about protecting those fingerprints.

The NAIC had attempted to create a central depository for fingerprints but was met with industry opposition.


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