With the signing of insurance producer licensing reform legislation by Tennessee Gov. Don Sundquist and the adoption of a similar proposal by the South Carolina legislature last week, a super-majority of 46 states have advanced agent and broker licensing reforms in the last two years.
Despite the unprecedented pace and scope of state-level licensing reforms, the Independent Insurance Agents & Brokers of America (IIABA) is continuing its advocacy efforts in those states that have not yet acted, Ronald A. Smith, chairman of the Association’s State Government Affairs Committee, commented. “Although the Gramm-Leach-Bliley Act (GLBA) requires only a majority of states to take action, IIABA believes that true reform must be national in scopemeaning all states must act,” Smith, president of Rochester, Ind.-based Smith, Sawyer & Smith, Inc. and an IIABA past president, said. “We encourage the remaining states to take action as quickly as possible and offer our assistance to making this goal a reality.”
The GLBA, enacted in Nov. 1999, requires 29 states and U.S. territories to enact specified producer licensing reform by this November. If the necessary number of states fail to enact these reforms, the National Association of Registered Agents and Brokers (NARAB) would be created, supplanting the states’ producer licensing authority. In order to be compliant with the requirements of the federal statute, states must adopt either uniform or reciprocal laws. Because reciprocity is the easier test to satisfy, it has been the initial goal of state policymakers.
“The states have exceeded the expectations set by the crafters of the Gramm-Leach-Bliley Act,” IIABA vice president of State Government Affairs and State Relations Wesley Bissett commented. “State lawmakersboth legislators and regulatorshave done an incredible job developing legislative proposals, navigating potential pitfalls and securing the enactment of much-needed licensing reform.”
Working with the National Association of Insurance Commissioners (NAIC), IIABA was a key contributor in the development of the Producer Licensing Model Act, the adoption of which allows states to become compliant with the NARAB requirements. This model act has been used as the template by most of the states adopting licensing reform.
This year, six statesMassachusetts, Michigan, Ohio, Vermont, West Virginia, and now Tennesseehave enacted reform legislation based significantly on the Producer Licensing Model Act. The South Carolina bill is expected to be signed by the governor soon.
“The adoption of meaningful licensing reform on a national basis is a top priority of IIABA,” Bissett continued. “From the outset, IIABA, its state affiliates, and its individual members have played a major role in the development of the model act and in securing its adoption in this large majority of states. When others said it could not be done, we rolled up our sleeves and went to work.”
“For IIABA members, the adoption of agent and broker licensing reform moves us closer to the long-sought goal of creating a more efficient and streamlined multi-state licensing process,” Smith added. “Once all states have enacted producer licensing reform, agents and brokers will be able to conduct business in every jurisdiction more efficiently and more cost-effectively.”
Now that most states have acted and with the November deadline quickly approaching, the NAIC is shifting its attention to determining whether each state statute is in compliance with the NARAB reciprocity requirements. To satisfy the GLBA’s reciprocity test, states must license nonresident producers in most cases without imposing additional obligations or conditions, and accept as adequate and complete the licensing process of the agent’s home state. GLBA also provides a savings provision that makes clear that states need not eliminate established consumer protections in their pursuit of reform.
“The NAIC, which is charged under federal law with making the initial determination of whether states are in compliance with NARAB, has begun its compliance reviews,” Bissett said. “Many parties have invested considerable effort in securing the enactment of these unprecedented reforms, and IIABA calls on the NAIC to begin the formal certification process as soon as possible so that the results can be determined well in advance of the approaching November deadline.”
“IIABA, its members and certainly the states themselves believe the laws have far and away exceeded the requirements and thresholds of the GLBA,” Smith added. “We fully expect that the outcome of this review will be that nearly all, if not 100 percent, of the states will be certified in compliance with the NARAB requirements and that NARAB will become part of the industry’s historical lexicon.”
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