Filed Under:Agent Broker, Agency Management

NARAB Bill Under White House Scrutiny

The White House has expressed concerns about some technical provisions of legislation that would re-establish the National Association of Registered Agents and Brokers (NARAB).

At the same time, Sen. Tom Coburn, R-Okla., has proposed an amendment to the legislation that would allow states to opt-out, a provision that concerns industry officials.

“An opt-out sounds appealing but in reality is a poison pill,” said Joel Wood, senior vice president of government relations at the Council of Insurance Agents and Brokers.

He said that under NARAB, states retain all of their core licensing responsibilities, “it is simply an administrative mechanism for multi-state licensing.”

Wood added that, “As we’ve seen with the surplus lines laws post-the Dodd-Frank financial services reform law, “it’s important for all states to be a part of any such facility or it simply doesn’t work.”

Wood said that agents and brokers “appreciate Coburn’s intent and honor it completely.” He lauded Coburn, who plans to step down at the end of the year because of illness, noting that, “He’s thoughtful and principled.” However, Wood said, “a change in the construct of the legislation could call into question the entire legitimacy of the enterprise.”

He said the CIAB has “worked so long, for so hard, to achieve the enactment of this legislation.

“We hope and think we will move forward toward that goal this week,” Wood added.   We’re all so grateful, too, for the leadership of the Senate Banking Committee on both sides of the aisle, and for our lead champions, Sens. Jon Tester. D-Montana, and Mike Johanns, R-Nebraska. 

The bill is S. 1926, the Homeowner Flood Insurance Affordability Act of 2014 and National Association of Registered Agents and Brokers Reform Act of 2014.

The Senate brought the bill to the floor through rarely used emergency procedures by an overwhelming 86-13 vote Monday night. Floor action could begin as early as Wednesday, industry officials said.

A trade group official explained that 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,” the lobbyist said.

That provision is what captured the attention of the White House. In a statement of administration position released on Monday night, the administration said that it “has constitutional concerns” with the requirement that the president reserve eight of the thirteen positions on the NARAB board of directors for state insurance commissioners, “which appears to significantly constrict the pool of individuals from which the President would be able to make those eight nominations.”

However, the statement of policy did not include a veto threat.

The statement of administration position said this restriction “appears to impermissibly limit” the scope of the president's appointment power. In the statement, the administration said it recommends that this requirement be amended to expand the size of the pool of potential appointees.

The White House statement also voiced concern with another provision, which provides a process for conducting criminal history records checks on individuals applying to become members of NARAB “that is inconsistent with the normal process the FBI uses to conduct thousands of such background checks.”

The statement said that the administration believes the bill “can be made consistent with current law in order to assure the benefits of an efficient and effective established process,” but did not elaborate.  

The provision, which passed the House overwhelmingly in October, has been added as a sweetener to controversial legislation that would delay for as long as four years rate hikes mandated for the National Flood Insurance Program through a 2012 law.

“NARAB II is important legislation that will benefit consumers as much as it does agents,” said John Nichols, president of the National Association of Insurance and Financial Advisors (NAIFA).

Nichols said that, “People shouldn’t lose access to trusted insurance advisors simply because they live in a different state. NARAB II will make it easier and more cost-effective to maintain client relationships across state lines while ensuring that insurance regulation remains at the state level. NAIFA is pleased that the Senate is considering NARAB II as part of S. 1846 and urge its passage.”

NARAB was added to the flood insurance rate rollback legislation 10 days ago by Sen. Robert Menendez, D-N.J. The entire bill has the support of 30 senators from across the aisle, and is considered as a pocketbook issue by consumers and public officials in states from Hawaii to Vermont.

However, the insurance industry and fiscal hawks oppose delaying the increases, and Menendez and other supporters of the bill added the NARAB provision as a sweetener to industry.

The combined bill was cleared for floor action on the 27th late Jan. 16th, by the Senate leadership after agreement was reached on what amendments will be allowed to be debated on the floor.

The Senate Banking Committee passed the version included in the flood bill in June, and the full House in October. It would establish a mechanism for establishing true nonresident licensing reciprocity for insurance agents. 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 in a statement issued when the bill was passed by the House.

A trade group official explained that 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,” the lobbyist.

The basic premise of the legislation is that, “If you want to keep getting nonresident licenses state by state, fine, you can keep doing that,” the lobbyist.

“If you’re only licensed in two or three jurisdictions, that’s probably the easiest thing to do,” the lobbyist said

However, under the NARAB-II legislation, agents would have the ability to submit themselves for “membership” in NARAB.  “The governing body will set qualifications for membership,” and the qualifications have to be based on the “highest standards” that exist in any state law … which really isn’t that high a barrier, the lobbyist said.

But that will mean continuing education, criminal background checks, fingerprinting, etc., he said  NARAB, for example, could decide that if you hold a CPCU designation, then you are automatically qualified for a p/c license.  It will be integrated with the National Insurance Producer Registry now run, sort of, by the NAIC. 

“You get your NARAB designation, and then you check off all the states where you want a nonresident license,” but you will have to be licensed first in your home jurisdiction,” he said. 

Under the provision, NARAB will collect all of the state licensing fees and remit them to the states. 

“States will have a short period of time to object to you being allowed to sell in their state, so they get an initial look/see, but that’s it,” he said. “They can’t discriminate against a NARAB member.  Basically, it is ‘two-stop” shopping,” he said. 

First, an agent has to be licensed in his home state, then get licensed with NARAB and pay the fees, he said. “Under the provision, there has to be self-funding, with no access to federal funds or subsidies,” he said. 

If the bill clears legislative hurdles in the Senate, passage is likely.

However, the bill may face major reworking in the House.

Opponents of the bill within the insurance industry are already erecting roadblocks. For example, – a coalition of environmental groups, taxpayer advocates, insurers, and housing and mitigation organizations, said they have won the support of House Speaker John Boehner, R-Ohio, in opposition to the bill. “We applaud Speaker Boehner for rejecting proposals to further delay flood insurance reforms and hope that he will instead explore measured changes that will put a troubled program on a path to fiscal viability,” said in a statement.  

The statement cited the CBO projection of the cost of delay.  “The Congress has just passed a one-year delay of some provisions in the omnibus bill.  A four-year delay would make the situation even worse.  Clearly the Speaker understands the gravity of this situation and we look forward to working with the House on targeted changes,” the statement said.

As for NARAB-II, a property-casualty industry lobbyist said, “there is very little opposition to the NARAB provision.” 





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