A review of how states are complying with uniform producer licensing standards shows high compliance on 26 of 37 benchmarks, according to the National Association of Insurance Commissioners.
“This self-assessment outlines where we stand today in terms of compliance with the Gramm-Leach-Bliley Act’s reciprocity requirements and uniform resident licensing standards,” said New Hampshire Insurance Commissioner Roger Sevigny, who chairs the NAIC/Industry Producer Licensing Coalition.
“It also provides an independent legal review and on-site peer assessment of our licensing laws, regulations, practices and processes,” added Mr. Sevigny, who is president-elect of the Kansas City, Mo.-based NAIC.
The NAIC conducted the review via a team of volunteer regulators who visited 52 jurisdictions to examine compliance with 2002 NAIC reciprocity standards among states. The standards were developed so that states would be in compliance with the Gramm-Leach-Bliley Act of 1999, which required states to establish reciprocity to avoid establishment of a federal licensing body–the National Association of Registered Agents and Brokers.
The NAIC team defined “high compliance” as fulfillment of the standard by 35 or more states. The NAIC also checked on how states are using electronic tools to ease the licensing process (see accompanying graphic).
The Feb. 19 NAIC report also pointed out as indicators of success the fact that in an effort to address privacy concerns and move away from state-specific licensing numbers, 47 states have dropped the use and disclosure of Social Security numbers and have implemented–through its affiliate, the National Insurance Producer Registry–the use of a National Producer Number.
In addition, according to the report, 45 states have implemented the electronic, centralized NAIC’s Address Change Request system, through which a producer may notify all appropriate states.
Appointment and termination enhancements have also been put in place, with 41 states using NAIC/NIPR to electronically process appointments and terminations, while six states (and soon to be more) electronically process appointment renewals. Only two other states require appointment and termination transactions but do not leverage NIPR.
Consumer protection–an area insurance commissioners point to as a key reason why state regulation needs to be retained, rather than relying on a federal system–has been enhanced by a state tracking system, according to the NAIC report.
As evidence, the report cites the NAIC’s “2006 Insurance Department Resources Report,” which found that states took the following actions against producers:
o 1,694 license suspensions
o 1,509 license revocations
o 473 cease-and-desist orders
o 1,108 license denials
In addition, states levied fines of $19.8 million against producers and recovered $61.6 million in restitution for consumers, the report noted.
The NAIC team found that among noncompliant states there was a willingness to move toward compliance. For instance, it reported that four states identified as not checking work authorizations for resident applicants who were non-U.S. citizens indicated they would “immediately change their processes.”
Twelve standards had “low compliance,” identified as less than 35 states being in compliance, but reasons were more complicated than simply changing administrative procedures, according to the NAIC report.
Reasons ranged from legislative hurdles, the interpretation of uniform licensing, and the lack of concern among the local industry regarding noncompliance.
As an example, continuing education standards fell into this category, “where full exemption or fewer hours are required for producers who are over 65 or have been licensed for 30 years or more.”
As an example of the complexities of determining requirements, 39 states were found to be out of compliance with fingerprint standards. Twelve states said there would be opposition to any fingerprinting requirements from their local industry, trade and producer groups, while three states noted opposition from state legislatures. Ten said they could not comply with the standard until there was a central depository, while six states expressed concern about protecting those fingerprints.
The NAIC had attempted to create a central fingerprint depository but was met with industry opposition.
Four states that were found to be in compliance do not submit fingerprints electronically, while two states that do not submit prints totally electronically were found to be out of compliance, suggesting an area of inconsistency.