Legislation re-establishing the National Association of Registered Agents and Brokers (NARAB) was passed today by the Senate and sent to the House.
It was passed as part of S. 1926, the Homeowner Flood Insurance Affordability Act of 2014 and National Association of Registered Agents and Brokers Reform Act of 2014.
Officials of the National Association of Insurance and Financial Advisors and the Insured Retirement Institute both voiced strong support for the decision, while cautioning that the flood provisions — not the NARAB title — faces strong opposition in the House.
The overall bill passed the Senate, 67-32, but the real sign of strength of support was in the form of a vote on an amendment by Sen. Tom Coburn, R-Okla., that would allow states to opt-out, a provision that concerns industry officials. The vote rejecting that amendment was 75-24.
The White House also seeks some changes in the legislation, as noted in a Statement of Administration Policy issued late Monday.
The legislation is modeled after the National Association of Securities Dealers (NASD) and will be a completely voluntary, self-regulating organization. “The big concession we’ve made is on governance – that a majority of the governance has to come from state insurance commissioners,” one lobbyist involved said.
In seeking support for his amendment, Coburn said that, “An opt-out keeping the 10th Amendment (state’s rights) privileges of the state is required to make sure that we do not go outside the bounds of our legal obligations.”
But, Sen. Mike Johanns, R-Neb., urged the Senate to reject the amendment. “We have worked so hard to get everybody on board,” he said.” It does empower states. It does allow them to do what they need to do.”
John Nichols, NAIFA president, said the passage of the NARAB title “is a win for insurance agents and brokers, but more importantly it’s a win for consumers.”
He said that relationships “forged between agents and their clients are important and often last for decades.
“These relationships are built on trust, consumer confidence, and superior service,” Nichols said. “They shouldn’t have to end simply because a client moves to a different state. Under the bill, if your agent is a NARAB member and you move to another state, then you can keep your agent.”
Cathy Weatherford, IRI president and CEO, said that “For the first time ever, the Senate has voted to pass NARAB II legislation to help streamline and improve the insurance licensing process for thousands of financial advisors across the nation.”
She noted that the House passed standalone NARAB II legislation in September, but will need to pass the Senate bill for it to become law.
She added that Senate action was “significant” and “an important step” toward removing a regulatory barrier that has been impeding broker-dealers’ ability and financial advisors’ willingness to sell lifetime income products.
In his comments, Nichols disclosed that a survey of NAIFA members revealed that they spend an average of 29 hours per year complying with insurance licensing requirements and an additional 28 hours on insurance-specific education courses. They spend an average more than $350 per year on insurance-specific continuing education courses.
“The time and money spent on licensing adds up quickly for those who operate across state borders,” Nichols said. “But an agent’s failure to hold licenses in multiple states can harm their business, as well as consumers. Some 80 percent of NAIFA members say they have lost clients who moved to states in which they were not licensed.
“This is really the culmination of a long-term grassroots effort,” Nichols added. “NAIFA members have met numerous times with their senators and representatives on behalf of their industry and on behalf of consumers to explain how NARAB will benefit everyone. It’s great to see those efforts paying off.”