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Given the fact that getting an optional federal charter approved anytime soon is little more than a pipe dream, I hope the industry rallies around the latest proposal to use Uncle Sam not as the industry's ultimate regulator, but more as a facilitator to make multi-state licensing of agents and brokers more efficient. I also can't help but wonder why the same concept could not be applied to national insurance company licensing as well.

Yesterday, as reported by our own David Postal, the NARAB Reform Act was introduced in the House of Representatives by Rep. David Scott, D-Ga., and Geoff Davis, R-Ky.

The bill, reports Mr. Postal, “provides for one-stop non-resident licensing by establishing a National Association of Registered Agents and Brokers as a private, non-profit entity managed by a board composed of state insurance regulators and marketplace representatives.”

The legislation would allow state regulators to continue supervising and disciplining producers, as well as enforce state consumer protection laws.

NARAB membership would be voluntary, with non-member producers free to remain licensed through their own respective states, without penalty.

Producers would have to submit to a national criminal background check for membership, and NARAB would have to coordinate with the states to create a central clearinghouse for licenses and broker activity.

For those producers doing business in multiple states, this seems to be a reasonable alternative to state-by-state licensing, with all the costs and hassles involved, without stripping the individual states of their consumer protection abilities.

NARAB was originally conceived by the Council of Insurance Agents and Brokers back in 1999. While it never made it as a stand-alone piece of legislation, NARAB did get tucked into Gramm-Leach-Bliley Act as a provisional measure–triggered only if a critical mass of states failed to achieve uniformity on producer licensing.

But while enough states cleared GLB's hurdle to head off NARAB's creation, most producers still complain that without complete compliance, multi-state licensing is still not nearly as efficient as it should be. Thus, even the Independent Insurance Agents and Brokers of America–no supporter of NARAB years ago, and certainly no backer of federal regulation–is solidly behind this latest legislative initiative.

CIAB, which would much prefer an optional federal charter, is offering qualified support at this point, taking issue with NARAB's proposed governance structure.

But other OFC backers, such as the American Insurance Association, are against the move, arguing that a national charter would be far more effective.

However, I would suggest that even if you support an OFC, the feds are not likely to put one in place. Washington already has its hands full, and isn't keen on creating an entirely new regulatory bureaucracy to directly supervise the sprawling insurance market.

And no matter who takes over the White House next year–whether he/she is a Democrat or a Republican–I cannot imagine an OFC would be very high on the legislative agenda, especially with the industry itself so bitterly divided over the issue. Legislation to enable creation of a NARAB facility would be far more politically feasible.

I would even go further, and propose a NARAB-type licensing entity for insurance carriers. The logic behind the basic concept is the same, is it not?

Passed in conjunction with a bill to set federal standards for regulation of reinsurance and surplus lines, many of the complaints about state regulation would be addressed, would they not?

What do you folks think?

Special Reports /

Why Not A NARAB For Insurers, Too?

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