The future for brokers could soon get a whole lot easier. A Senate hearing held Tuesday centered on NARAB II, the National Association of Registered Agents and Brokers Act of 2013, introduced last week in both the House and Senate. The bill creates a non-profit, national organization of the same name that would simplify the licensing process for brokers conducting business outside of their state of residence.
Three industry representatives unanimously agreed that the bill would have no groups, to their knowledge, against the law. Industry spokesmen from the National Association of Insurance Commissioners, Independent Insurance Agents and Brokers of America and the Council of Insurance Agents and Brokers were on hand to testify at the hearing. The bill, S.534, is sponsored by Sens. Jon Tester (D - Mont.) and Mike Johanns (R - Neb.).
“Honestly senator, I think it’s a lovefest,” said Monica Lindeen, vice president of NAIC and Montana’s insurance commissioner, during the question portion of the hearing. “It’s to the point where we all agree and we need to move forward.” Tester noted in his opening statement that the bill has 12 bipartisan co-sponsors and Johanns stated the he wanted “to see the bill signed into law.” He continued noting that if that happens, “it logically follows that competition will increase and costs will go down … our small business insurance producers will have a decreased burden.”
The cautious voice at the table was that of Baird Webel, a specialist in financial economics at Congressional Research Services. He noted that successful regulations of industries work best when Congress has direct and continued oversight from either a financial perspective or otherwise. “In this case, it becomes a private body … and I think that brings up challenges on how Congress continues to oversee what it has created,” Webel said in his verbal testimony.
But following the hearing Jay Jensen, who testified for IIABA, said this didn’t concern him. He highlighted during the session that the juggling of licenses is so “confusing that many [brokers] are forced to retain consultants to keep track.” This is a hindrance not only to the broker, many of whom are small business owners without substantial resources, but also to the consumer who needs the product, he said. “I myself am currently licensed in 27 states,” he continued, noting that at one point he had a license delayed for 45 days because no one at the unnamed state office could figure out what was wrong with the application.
Historically, licensing for the insurance industry has strictly remained with the states due to several landmark court decisions in the last 150 years, according to the Congressional Research Service. The most recent attempt to homogenize the licensing process began in 1999 with the Gramm-Leach-Bliley Act and next NARAB I in the 2000s. NARAB II was first introduced in the House in 2008 and first in the Senate in 2012. While some details have changed in different versions of NARAB II, the core legislation remains the same.
“If there was ever a sweet spot to be achieved, this legislation achieved it. Through working together in compromise … and recognizing the states are the regulators and I do believe the legislation respects that. If this problem isn’t solved at some point then I think you have a risk of other legislation at some point in time that turns everything upside down. This legislation has the best chance of solving a very difficult problem,” said Johanns at the conclusion of the hearing.
Notable components of NARAB II include a 13-member board of the organization appointed by the president and confirmed by the Senate and federal criminal background checks for all members of the group. The board would include eight state insurance commissioners.
The hearing was conducted in the Senate Banking Subcommittee on Securities, Insurance and Investment. A committee hearing has not yet been scheduled in the House. The next step for the Senate bill would be a move to the full committee and eventually the floor for a vote.
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