Developing a comprehensive model act setting forth a fingerprint/background check program for all industry personnel “puts the cart before the horse,” according to the Property Casualty Insurers Association of America.
“The National Association of Insurance Commissioners’ (NAIC) efforts to create a model act is misguided. The first priority needs to be the development of an operational repository for digital fingerprints from industry personnel and the business rules for a coordinated system of obtaining criminal background checks among the states,” stated Lenore Marema, PCI Assistant VP-Industry and Regulatory Affairs. “While the NAIC is working on using its National Insurance Producer Database (NIPR) as the central repository, it is also working in tandem to develop a model act to determine who in the industry will be fingerprinted and be required to have a criminal background check.”
The PCI pointed out that in the organization’s considered opinion the “centralized and electronic database system that the NAIC envisions, which serves as a basis for the proposed Authorization for Criminal History Records Model Act, cannot even exist in the current legal environment.”
“Wouldn’t the NAIC’s energies be better spent on obtaining the federal legislation that all states need to access the FBI database to conduct criminal background checks?” Marema continued. “Any model state legislation should be limited to the corollary statutory provisions that need to be in a state law for this process of background checks to exist. In addition, before enacting a model act, wouldn’t state legislators want to show that the central repository system would work, in terms of storing digital fingerprints that can be accessed by any state and sent to the FBI?”
During a recent interim conference call of the Fingerprint Subgroup of the NAIC’s Producer Licensing Working Group, NAIC regulators discussed the provisions of its proposed model act and indicated that the operational central repository may not be in place until 2005. PCI said it was not clear that all states will participate in the central clearinghouse and that many states could opt to conduct individual state background checks instead.
“Let’s face it,” Marema observed, “if states enacted this NAIC model law now, it would have to be implemented in a cardboard fingerprint card world. Only a few states currently require fingerprinting and background checks for either agents or company officers and directors. The overall result, if the NAIC moves forward with this model, is that with more states added, the system will be an even more costly and duplicative system than exists right now.”
The PCI’s bulletin noted that the NAIC “turned its attention to uniformity in resident agent licensing requirements in 2004.” It has established a number of guidelines involving the transmission of digital fingerprints and background checks, but the PCI said it “believes that too many details and questions remain unresolved.”
“The NAIC is way ahead of itself in putting pen to paper in drafting a model law,” Marema stated. “Rather, the focus needs to be on the very first steps that states need to take in moving toward the NAIC’s vision of a seamless system of background checks in connection with state licensing. Those steps are to get authority to access the FBI database, to develop the central repository for storing industry fingerprints, and to create an overall policy for background checks.”
The PCI also raised additional questions about other situations that need to be made “more consistent and uniform—including whether officers and directors of companies should submit to background checks, as well as whether agent testing should be repeated upon license renewal, license expansion into new lines or license expansion into new states?”
“One of the main reasons state regulators are having trouble writing this model is that there is no real consensus among them as to who should be fingerprinted and subjected a background and–when,” Marema stressed. “The PCI believes that state background checks should be financially and commercially reasonable, seamless and not repetitive and aimed at problem transactions. The PCI doesn’t believe that the database described the by the NAIC is viable at this time and also has strongly discouraged the development of any model legislation because too many unanswered questions raise concerns about the possible success of this endeavor.”
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