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Legal Ease by Scott Sinder Progress is Progress

Sometimes even the NAIC can take small steps forward.

By  Scott Sinder and John Fielding

The NAIC met—again—in December. Like all of these quarterly sessions, there was a “been there, done that” feel to the whole thing. But to be fair, the regulators have made some progress this year on an issue of real importance to members of The Council—producer licensing. The NAIC’s Producer Licensing Coalition is chaired by New Hampshire Commissioner Roger Sevigny. It was organized last June, and the regulators are to be commended for their focus on the problems we face in producer licensing across the country. The coalition’s current focus is a state-by-state audit of insurance departments. According to the regulators, the intent is to review each state’s producer licensing procedures—soup to nuts—to determine if they are in compliance with state and federal statutory and regulatory requirements.

To the extent a state falls short, the commissioner will be provided with the information necessary to make changes to comply. We have already seen some positive changes with North Dakota and Alabama both making procedural changes to ease filing burdens. The audits are scheduled to be completed by early February, when a comprehensive report will be presented to the NAIC membership. We have received assurances that the industry will be kept apprised of the auditors’ findings as the process moves along. In truth, it is in the regulators’ best interests to keep us in the loop. No doubt some of the changes will likely require legislative and regulatory action. Support from the industry will be crucial in getting anything passed. In fact, the regulators have explicitly asked for our assistance when legislation is proposed to fix producer licensing issues because they have faced local reform opposition in the past.

There is sometimes a real disconnect between what industry representatives tell the NAIC and commissioners nationally and what happens locally when the commissioners go back to their states. State and local associations don’t always have the same interests as those of us who view things more globally.  Political pressures at home have delayed and killed reform efforts, so we need to keep up our end of the bargain. To get the fixes we have been pushing—full reciprocity and true uniformity—we need to support the appropriate legislative and state regulatory changes when proposed. Regulators are making an effort, and we should not leave them hanging—for their sakes as well as ours. The Council does not have local or state affiliates, so it is up to individual Council members to actively support these changes. I hope we will see legislative and regulatory proposals right out of the gate this year, and we should be prepared to act. I am enthusiastic about the coalition and the latest regulatory effort to fix producer licensing.  Having said that, I’m a realist. This is by no means a “silver bullet” and it will not result in producer licensing nirvana. But I am also realistic enough to know that progress is progress, and we should continue to fully take advantage of this opportunity to improve the current state of affairs.

The other high profile producer-related issue tackled at the NAIC’s December meeting involved the federal surplus lines legislation that The Council has strongly supported. To date, the NAIC has expressed no objection to the Nonadmitted and Reinsurance Reform Act of 2007. In fact, in testimony, the regulators conceded federal legislation would likely be necessary to fix the state surplus lines premium tax mess. As the bill gets nearer to final passage, however, some regulators are coming out of the woodwork with concerns. It has frustrated us and other bill supporters because the objections raised reflect a lack of understanding of the legislation and the marketplace. There appears to be little desire on the part of some regulators to really understand what the bill does and doesn’t do. We are encouraged, however, by the comments of the NAIC leadership, which appears to understand the need for this bill as a useful tool not only for industry and consumers, but for the states as well. My sense is that, in the end, the NAIC will not oppose the legislation but, rather, will propose some technical changes and perhaps offer qualified support.

Lastly, December at the NAIC is the time for the election of officers. True to form, each of the current officers moved up one position (with Alabama’s Walter Bell becoming “Immediate Past President”). Sandy Praeger of Kansas is the NAIC’s president for 2008; Roger Sevigny is president-elect; and Jane Cline of West Virginia is vice president. Susan Voss, the Iowa commissioner, is the new Secretary-Treasurer. This slate has strong interest and solid experience in producer issues. Sevigny chairs the Producer Licensing Coalition and serves on the National Insurance Producer Registry (NIPR) board. Voss serves on the coalition and the NIPR board and has been very active in producer issues. This bodes well for the efforts of both the coalition and NIPR. The constant turnover among state regulators makes continuity a rare commodity at the NAIC, so to have such involved members at the leadership level for the next several years is a welcome turn of events.

Sinder, a partner at Steptoe & Johnson, is CIAB General Counsel.

Fielding is of counsel at Steptoe & Johnson.


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