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Regulation and Compliance > State Regulation

NAIC Report Sees High Compliance On Producer Licensing Standards

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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 the 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. It also provides an independent legal review and on-site peer assessment of our licensing laws, regulations, practices and processes,” says NAIC President-Elect and New Hampshire Insurance Commissioner Roger Sevigny, who also serves as chair of the NAIC/Industry Producer Licensing Coalition.

For the NAIC report, 52 jurisdictions were visited to examine compliance with 2002 NAIC reciprocity standards among states. The standards were developed so that states would be in compliance with Gramm-Leach Bliley, which required that states establish reciprocity 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 statistics in the chart provide a snapshot on how states are utilizing electronic tools provided through the NAIC and its affiliate, the National Insurance Producer Registry (NIPR), to enhance and simplify the licensing process for producers.

Other indicators that the NAIC report, dated Feb. 19, point to as indicators of success include the fact that, in an effort to address privacy concerns and move away from state-specific licensing numbers, 47 states have moved away from the use and disclosure of Social Security numbers and have implemented, through NIPR, the use of a National Producer Number (NPN).

Additionally, the report says, 45 states have implemented the electronic, centralized Address Change Request system through which a producer may notify all appropriate states.

Appointment and termination enhancements have also been put in place with 41 states using NAIC/NIPR to electronically process appointments and terminations. Six states, and soon to be more, electronically process appointment renewals. Only two other states require appointment and termination transactions, but do not leverage NIPR.

Consumer protection, an area state insurance regulators point to as a key reason that state regulation needs to be retained rather than relying on a federal system of insurance regulation, has been enhanced by a state tracking system, according to the NAIC report.

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

o 1,694 license suspensions.

o 1,509 license revocations.

o 473 cease and desist orders.

o 1,108 license denials.

In addition, states levied fines of $19.8 million against producers and recovered $61.6 million in restitution for consumers, the report continues.

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

Twelve standards had low compliance–identified as less than 35 states being in compliance–but reasons were more complicated than just simply changing administrative procedures, according to the NAIC report.

Reasons ranged from legislative hurdles, the interpretation of uniform licensing and the lack of concern among local industry regarding non-compliance. As an example, continuing education standards fell into this category “where full exemption or fewer hours are required for producers who are over 65 or have been licensed for 30 years or more.”

As an example of the complexities of determining requirements, 39 states were found to be out of compliance with fingerprint standards.

Twelve states said 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 they could not comply with the standard until there was a central depository while 6 states expressed concern about protecting those fingerprints. The NAIC had attempted to create a central depository but was met with industry opposition.

And, 4 states that were found to be in compliance do not submit fingerprints electronically, while 2 states that do not submit prints totally electronically were found to be out of compliance, suggesting an area of inconsistency.


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