Today, the House overwhelmingly passed legislation that would provide a mechanism for establishing true nonresident licensing reciprocity for insurance agents.
The legislation was reported by the Senate Banking Committee in June and is awaiting floor action.
Industry officials privately believe that, despite the current gridlock in Congress, the program, called the National Association of Registered Agents and Brokers (NARAB), has a very good chance of being enacted by this Congress.
NARAB, as envisioned by the legislation, would create a non-profit, independent board that would allow multistate licensing for insurance producers.
Under the bill, insurance agents will be able to apply for NARAB membership and become licensed to sell insurance in multiple states, but states will maintain their full authority in regulating the business of insurance.
States would retain their regulatory jurisdiction over consumer protection, market conduct and unfair trade practices, and would retain their rights over licensing, supervision, disciplining and the setting of licensing fees for insurance producers, according to Ken Crerar, president/CEO of the Council of Insurance Agents and Brokers.
The bill is H.R. 1155, the “National Association of Registered Agents and Brokers Reform Act of 2013,” which passed the House by a 397-6 vote on the suspension, or expedited calendar.
The bill was introduced by House Insurance Subcommittee Chairman Randy Neugebauer, R-Texas, and Rep. David Scott, D-Ga., in March with 42 original cosponsors. The bill currently boasts the support of 86 bipartisan sponsors.
The bill did not need action by a House committee because it has already passed the House in two prior Congresses by voice vote, according to Joel Wood, CIAB senior vice president of government affairs.
The Senate bill is S. 534, the National Association of Registered Agents and Brokers Reform Act of 2013. It was introduced in the Senate in March by Sen. John Tester, D-Mont., and Sen. Mike Johanns, R-Neb. It has 24 co-sponsors.
The bill has strong support from the advisor industry.
Rob Smith, president of the National Association of Insurance and Financial Advisors said that “Nearly 80 percent of NAIFA members have lost clients who moved to states in which they were not licensed, and 12 percent report that they have lost more than 50 clients this way.
“NARAB II would offer a common-sense solution to this problem,” Smith said.
Currently, agents and brokers must be licensed in each state in which they do business, he said. He emphasized that NARAB II would create a national — not federal — clearinghouse for insurance agents and brokers to obtain approval to operate on a multi-state basis. He said NARAB would be governed by a board dominated by state regulators and would establish standards for membership that meet or exceed the existing requirements in any state.
A prospective NARAB member would be required to be fully licensed in his or her home state and satisfy rigorous membership criteria for the national organization, Smith said. An approved NARAB member could utilize the clearinghouse to obtain approval to operate in any other state, he said.
Investment Retirement Institute president and CEO Cathy Weatherford said there is unprecedented momentum to get this bipartisan legislation enacted in to law to secure its promise of an efficient and cost-effective insurance licensing process for financial advisors operating in multiple states. “This is a common-sense bill that will maintain important consumer protections, retain states’ authority to regulate the marketplace, and ultimately remove a barrier that is impeding broker-dealers’ ability and financial advisors’ willingness to sell lifetime income products,” Weatherford added.
“The NAIC commends the House of Representatives for passing the National Association of Registered Agents and Brokers Reform Act of 2013,” said Commissioner Jim Donelon in a statement. “In particular we thank Representatives Randy Neugebauer and David Scott for their longstanding leadership and support of this bipartisan legislation. NARAB streamlines the multi-state agent licensing process through a regulator-controlled board and preserves state enforcement of critical consumer protections. We urge the Senate to move swiftly to pass this common sense legislation.”