Agent Appointment Rules Reconsidered

Agent Appointment Rules Reconsidered

At least one major insurer group is peeved and worried by the decision by state regulators to send back one important aspect of uniform producer licensing rules for further consideration–the agent appointment process.

The reason given by the Executive Committee of the National Association of Insurance Commissioners for remanding the issue to the NARAB Working Group was to clarify certain data provisions of the model appointment form, according to the Alliance of American Insurers in Downers Grove, Ill.

However, the Alliance is concerned that this could serve as an opportunity to revisit a contentious issue with which the insurance industry and regulators had wrestled for at least two years.

Larry E. Kibbee, Alliance vice president and regional manager, told National Underwriter that the NAICs Producer Licensing Model Act specifies that “going forward,” agent appointments will be by company.

However, a number of states insist that they want to keep making appointments by line of coverage, he reported. Although these states contend it is a matter of consumer protection, Mr. Kibbee believes the real issue is revenue-generation, as appointments by line of coverage generate more fees per company in those states.

After numerous discussions of the issue over the years in the Uniform Producer Licensing Working Group, the NARAB Working Group, and the Financial Services Modernization (G) Task Force, the insurance industry believed that a consensus had been reached and that the Executive Committee would be voting on all aspects of uniformity in agent licensing, Mr. Kibbee said.

But when the matter was before the Executive Committee at the NAIC's meeting earlier this month in New Orleans, a few committee members said they had concerns about the ability of some states to comply with certain data elements included in the proposed model agent appointment form.

What makes Mr. Kibbee concerned, if not suspicious, is that the Executive Committee remanded the entire appointment process issue, instead of accepting the process and just sending back the form issue for further review.

Noting that it was the same three states–Florida, Kentucky and Virginia–that had “dragged their feet” on the appointment issue throughout the working groups proceedings, Mr. Kibbee told regulators in several meetings in New Orleans that both the industry and the NAIC should monitor “what these folks are doing to make sure its not a bigger issue than what they claim it is.”

He stressed that the appointment process “is the single most critical issue that companies have with uniformity” in terms of agency licensing. He said that the industry does not want to rehash appointment and renewal issues that had already been resolved.

“My point is, lets deal with these data elements in the form without delay, and get the appointment process back before the Executive Committee for review as soon as possible,” he said. If the states “are intent on these other issues, then were back to square one,” he added.

NARAB stands for the National Association of Registered Agents and Brokers, an entity that would have been created under the federal Gramm-Leach-Bliley Act had at least 29 jurisdictions failed to meet standards providing for reciprocal treatment of non-resident producers by Nov. 12. The NAIC officially certified in New Orleans that 35 states had met the GLB's reciprocity threshold, thus averting a federal takeover of the producer licensing system.

However, the Washington-based Council of Insurance Agents and Brokers noted that much work remains to be done to achieve GLB's actual goal of national agency licensing uniformity, since four of the largest states–California, Florida, New York and Pennsylvania–have failed to take proper action to permit reciprocal licensing, accounting for nearly 30 percent of the insurance marketplace. (See NU, Sept. 16, page 34.)

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 23, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.