Congress will be required to re-vote several years down the road on whether to sustain enactment of legislation creating a clearinghouse aimed at streamlining agent licensing.
An agreement by the Senate leadership, clearing the way for a vote today or Wednesday on legislation reauthorizing the Terrorism Risk Insurance Act (TRIA) for seven years, allows a vote on an amendment that will establish the National Association of Registered Agents and Brokers (NARAB).
However, as the price for allowing the amendment to be added, Sen. Tom Coburn, R-Okla., insisted that a provision is included in the amendment shutting down NARAB two years after enactment. The amendment adding NARAB to the TRIA bill is being sponsored by Sen. John Tester, D-Montana.
Earlier, during a Senate Banking Committee debate on a flood insurance bill that added the NARAB provision Jan. 30, Coburn sought a provision allowing states to opt-out of NARAB. That is a concern of industry officials, who desire NARAB as a means of making it easier for agents to sell insurance interstate. His amendment was rejected on the Senate floor, 75-24.
According to an industry lobbyist, Coburn last week “backtracked” on his agreement to allow his amendment to be considered to let states opt out, and threatened to hold up the entire TRIA bill if NARAB was offered.
The lobbyist said that Sen. Charles Schumer, D-New York, negotiated between Tester and Coburn and came up with the two year sunset. But the clock on the sunset won’t start ticking until the first license is issued, the lobbyist said. Moreover, the lobbyist said, it will probably take two years to get the program up and running.
Industry officials were unavailable for comment, but an industry lawyer familiar with the bill said that, while it is a setback, the requirement that the sunset provision be included is not necessarily fatal to the program.
Another official said that, “Certainly it is our hope that the House and the Senate will ultimately agree, and NARAB will be created without a sunset.”
But, this official said, “This agreement assures that NARAB will be attached to the Senate bill, just as we now have assurances that NARAB will be attached to the House bill.”
“Getting it up and running is the important thing,” the lawyer said. “Once it gets going, it will prove itself.” Indeed, another lobbyist said, “There is very strong, bipartisan, bicameral support for NARAB.”
John Nichols, president of the National Association of Insurance and Financial Advisors (NAIFA), confirmed the change. “Coburn insisted on the 2-year sunset or he would have objected to NARAB’s inclusion in the Senate TRIA bill,” Nichols said. “NAIFA prefers the House language which makes NARAB permanent.”
The overall bill is S. 2244, the Terrorism Risk Insurance Program Reauthorization Act of 2014.
The bill extends the TRIA program in its current form for 7 years, but does increase industry co-shares by one-third under a 5-year phase-in period. Legislation creating NARAB was reported out by the House Financial Services Committee without the sunset provision June 20. The House bill including establishment of NARAB is H. R. 4871, the TRIA Reform Act of 2014.
House members were alerted Friday that a vote this week on H.R. 4871, whose key provision is a TRIA reauthorization bill far different than the one than the one reported out by the House FSC.
However, industry lobbyists say that action on the House bill is likely to be delayed until next week. Industry officials said because of a technical requirement, the House FSC bill be reported to the full House has not as yet been complied with.
The NARAB legislation is modeled after the National Association of Securities Dealers (NASD) and will be a completely voluntary, self-regulating organization.
On a purely voluntary basis, agents and brokers can apply to NARAB for membership. Upon meeting the NARAB criteria, they can use the agency essentially as a “passport” system for multi-state licensure. NARAB’s membership criteria will be established by a board that is dominated by state insurance commissioners.
“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.
Earlier, John Nichols said the enactment of NARAB would be 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.”