The U.S. House of Representatives approved an insurance agent licensing reform bill that would provide non-resident licensing reciprocity among states.

David Scott

The bill, seeking to streamline non-resident agent and broker licensing, won House support last year, but was not acted on by the Senate, which must approve it before it can go to President Barack Obama for final action.

Sponsored by Rep. David Scott (D-Ga.) and Rep. Randy Neugebauer (R-Texas), the legislation was passed on the House’s suspension calendar, which is reserved for non-controversial bills. The proposal has 44 additional cosponsors from both parties.

The National Association of Registered Agents and Brokers (NARAB) Reform Act of 2009 (HR 2554), introduced in May 2009, is one of a number of measures before Congress seeking to modify how insurance and financial services are regulated. Some bills seek greater federal regulation and others tweak the current state-based system of insurance regulation.

This bill modifies the state-based system, recognizing the challenges some agents have in meeting licensing requirements that differ from state to state.

It “provides common-sense reforms that level the playing field between states for agents, allowing licensed agents to offer their services across all jurisdictions without impeding on the regulatory rights of the states themselves,” said Marliss McManus, senior federal affairs director for the National Association of Mutual Insurance Companies, or NAMIC, a group representing many property-casualty insurers. “This common-sense reform will help ensure that customers have a vibrant, competitive marketplace as they shop for insurance coverage.”

Under the bill, states would retain their authority over licensing, supervision, disciplining, and setting of licensing fees for insurance producers, as well as over insurance-related consumer protection and unfair trade practices, according to the bill. States would retain regulatory control over consumer protection and market conduct.

It would amend the Gramm-Leach-Bliley Act to reestablish the National Association of Registered Agents and Brokers as a nonprofit corporation to prescribe, on a multi-state basis, licensing and insurance producer qualification requirements and conditions.

The nonprofit corporation would establish membership criteria, including a mandatory criminal background check for state-licensed insurance producers. Producers who had a criminal history could be denied licenses.

Membership in NARAB would authorize an insurance producer to engage in the business of insurance in any state for any lines of insurance specified in the producer’s home state license, including claims adjustments and settlement, risk management and specified insurance-related consulting activities.

The bill says NARAB would “coordinate with state insurance regulators” to establish a central clearinghouse and establish a national database for the collection of regulatory information concerning the activities of insurance producers.

Bill provides ‘much needed reciprocity’

The House’s approval of the bill won the immediate support of the Independent Insurance Agents & Brokers of America (Big I), which said it supports reforms to the state-based insurance regulatory system and remains opposed to federal regulation. The bill would “modernize” the state-based system, according to a statement from the group.

Passage of the legislation would “achieve much needed reciprocity in producer licensing and help policyholders by permitting greater competition among NARAB members,” the Big I said.

Charles Symington, vice president of government affairs for the Big I, said its passage “would build upon regulatory experience at the state level, promote consistency, and preserve marketplace responsiveness by establishing true nonresident licensing reciprocity for the thousands of independent insurance agents and brokers who operate on a multi-state basis.”

Robert Rusbuldt, Big I president and CEO, added, “Although the state insurance regulatory system has worked effectively to ensure insurer solvency and look after policyholders, the system does need improvement in the area of agent licensing.”

He called it a move to create, “one-stop, non-resident licensing reciprocity.”

McManus of NAMIC said in a statement that passage of the bill would move insurance regulation in the right direction.

“As the Congress continues to study and debate the future of regulatory reform of the property-casualty industry, this approach would streamline the current regulatory system and establish uniform and consistent standards, while leaving the day-to-day regulatory control at the state level,” McManus said.